1,700 cheated Lehman savers will receive compensation

1,700 cheated Lehman savers are to get their money back! Malcolm Wheatley reveals when, and how, and what it means for savers everywhere.

As we revealed back in November 2008, when Lehman Brother went bust, thousands of ordinary savers lost their life savings - even though they had been promised their money was "100% secure".

The last time we wrote about the scandal, the Financial Services Authority had just announced compulsory 'guidance' that firms must follow when dealing with complaints about the mis-selling of complex "structured products" like those the savers had invested in.

And included in the plans was the placing into administration of three dodgy firms that sold these Lehman-backed savings plans -- NDF Administration, Defined Returns Limited, and Arc Capital and Income plc.

Savers who purchased Lehman-backed structured products through these firms were then told they might be entitled to compensation from the Financial Services Compensation Scheme, if the detailed wording in the marketing literature produce by these firms was deemed to be misleading.

A decision

Surprisingly quickly, the Financial Services Compensation Scheme (FSCS) has been able to announce that savers were indeed likely to have been mis-sold in certain cases, and that repayments can begin in respect of 1,700 investors.

Justice, at last!

Who is eligible?

Anyone who invested in the following plans will be eligible for compensation:

NDF - Capital Secure Fixed Growth Plan March 2008
NDF - Capital Secure Fixed Growth Plan April 2008
NDF - Capital Secure Fixed Growth Plan June 2008
DRL - Enhanced Returns Plan Issue 1
DRL - Enhanced Returns Plan Issue 2
DRL - Enhanced Returns Plan Issue 3
DRL - Enhanced Returns Plan Issue 4
DRL - Enhanced Emerging Markets Plan Issue 1
DRL - Enhanced Returns Plan Issue 5
Arc - Bull & Bear Enhanced Investment Plan 3

It doesn't matter whether you invested in these plans via an IFA or directly with one of the firms - the FSCS will be able to identify you from the firms' records. It will be sending applications forms to the postal address listed by the end of December, so obviously, if you've moved house and haven't told the firm you bought the products from, then you'll need to provide a current address.

When will you get your money back?

The FSCS says it aims to pay the majority of eligible claims within six months of receiving an application form and supporting information.

Good news indeed -- and for the savers concerned, a very definite early Christmas present. Many, don't forget, had been tricked by misleadingly-worded small print into parting with significant sums of money. While the average saver put £32,000 into these supposedly low-risk structured products, some put much more -- £200,000, in one case.

So what's next?

That isn't quite the end of the story, though. In addition to the 'Capital Secure' structured products identified by the FSCS, savers also bought into a number of 'Capital At Risk' products backed by Lehman Brothers.

The FSCS is continuing to investigate the position of investors who hold these 'Capital At Risk' products, and is not yet in a position to confirm whether these products are likely to give rise to valid claims for compensation. The official word from the FSCS is that it will "update investors as soon as it has completed its investigations."

It has, however, produced a list of those products:

NDF - Fixed Income or Growth Plan February 2008

NDF - Fixed Income Plan June 2008

DRL - Kick Out Performance Plan Issue 1

Arc - Fixed Income Plan 6

Arc - Stepped Kick Out Plan 5

So if your Lehman-backed savings are on the list above, then you'll have to wait. That said, "We are doing everything we can to complete our investigations into the 'Capital At Risk' products as quickly as possible," stresses FSCS chief executive Loretta Minghella.

Who won't be happy?

Well, potentially these very 'Capital at Risk' savers, if the FSCS finds that these products weren't mis-sold. Which is always a possibility.

And separately, the FSA has already reached the conclusion that the marketing literature produced by at least one other seller of Lehman-backed structured products wasn't in fact misleading. So they won't be happy -- although some of the affected savers are making complaints against the IFAs that introduced them to these products.

While lovemoney.com wasn't alone in campaigning for justice for mis-sold Lehman savers, we were one of the first to look at the issue. And in Six thousand people lose their life savings we urged savers to join Spirit, the action group set up by victim Peter Howard.

Spirit isnow urging savers to re-double their efforts to get their MP to write to the FSCS. "It's much easier to get the 'right' decision than it is to reverse a 'wrong' decision," explains Mr Howard. Quite.

To join Spirit, email spiritedawaybylehmans@hotmail.com.

What does it mean for all savers?

Hopefully, structured products won't be sold in such a misleading way in the future. But if there's one lesson savers should take away from this, it's this: never, ever invest in a complex savings plan you don't fully understand.

Compare savings accounts at lovemoney.com