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No release for elderly from income plans

 

MORE than 10,000 pensioners are saddled with debts that they can never hope to repay more than a decade after being sold home income plans, consumer groups claim.

Despite regulations against future mis-selling and a campaign to secure compensation for victims, the home income sales scandal lives on.

First introduced to the UK in 1972, the home income plan was designed to unlock equity in an elderly person’s home. Unsafe schemes flooded the market in 1988 and left many homeowners in difficulties.

Home income plans were often backed by high-risk investment bonds to provide borrowers with an income to pay off their mortgages. But interest rates rocketed and the bond performance plummeted.

Over the past decade the mortgage debt of thousands of pensioners has more than doubled. Some elderly homeowners owe more than £200,000 in interest on the loans.

Some borrowers have received compensation but that has often been swallowed by the outstanding debt as lenders continue to apply interest charges. The Consumers’ Association wants lenders to freeze debts but they have said no. Tony Craven, a retired medical representative from Hull, has campaigned for 12 years on behalf of 10,000 people struggling with debts. He said: “The home income plans were totally flawed and the risk warnings were not properly explained. Some financial advisers selling the high-income bonds were quoting returns of 40 per cent. The schemes could never have worked.”

Building societies including Halifax, West Bromwich, Chelsea and Staffordshire sold tens of thousands before the plans were banned in 1990 by Fimbra, the regulator; £55 million has been paid in compensation by the Investors’ Compensation Scheme to some 5,000 investors. Safe Home Income Plans (Ship) was launched in 1991 to promote safe schemes. Participating companies must observe a strict code.


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