Coutts, the Queen’s bank, is being pursued for compensation by lottery millionaires who were advised to invest in underperforming bonds.
The couple, from Devon, are hoping for hundreds of thousands of pounds in compensation.
They won a million pounds on the lottery in December 2001, and were advised by Coutts to put £650,000 into with-profits bonds, which gave them just £10,000 a year to live on.
“We chose Coutts because they are the Queen’s bank and we thought that they would be a safe pair of hands,” said the couple, who do not wish to be named. “We are so disappointed.”
The Financial Ombudsman Service confirmed that it would rule on the case in the next few months. Initially, the service had ruled against the lottery winners. However, it has since been sent extra evidence and will look at the case again.
The lottery winners said they hoped that publicity about their plight would be a warning to the 50 extra lottery millionaires who will be created by the National Lottery over Christmas and New Year.
These winners will be offered the chance to choose to obtain financial advice from one of a panel of banks, including many of the private banks associated with the wealthy.
Although they are not obliged to take advice from any bank about what to do with their money, a spokesman for Camelot (OTC BB: CAML - news) , the lottery operator, said many found this useful. “Our job is to make sure that we are providing the support they need,” she said. She would not confirm whether Coutts, which is now part of state-owned Royal Bank of Scotland (LSE: RBS.L - news) group, was one of the banks on the panel, but said: “All the key banks are on the panel.”
She added that Camelot does not make any commission from the banks it suggests to lottery winners.
The submission to the Financial Ombudsman Service stated that the winners, from Devon, were “normal working people” who earned £42,000 a year between them when they won the lottery.
It said that they should have been treated as “vulnerable people” by Coutts, because they became millionaires overnight. “Emotions would have been running high as the reality of what had happened to them sank in,” the submission stated. “They had no experience of handling wealth of this magnitude.”
The couple were sold with-profits bonds as a relatively low-risk investment. The aim of these bonds is to smooth out the peaks and troughs of the stock market by retaining some investment returns built up in good years so that payments can be topped up in bad years.
However, due to lower than expected investment returns and rising inflation, many bonds failed to live up to forecasts given when they were sold.
A spokesman for the ombudsman service said it received 348 complaints about the bonds last year and upheld around a quarter of them in the consumer’s favour.
A spokesman for Coutts said: “We cannot comment on individual cases because of client confidentiality”.
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