Scottish holders of endowment policies which were mis-sold through a solicitor have been warned by the government not to raise ‘false hopes’ over compensation.

Some policy holders who bought their policy before 2001 face shortfalls of thousands of pounds, yet the maximum they can claim in compensation is around £1000 under Law Society rules.

Ivan Lewis MP, the Treasury economic secretary, acknowledged that it was a scandal that a legal loophole would deny people fair levels of compensation, but said it wasn’t a situation that could be easily rectified.

He said that one of the problems of introducing new safety nets such as the Financial Ombudsman Service was that they couldn’t be made retrospective without incurring huge costs.
His statement came in response to a question raised by Sarah Osborne, a Labour MP who is fighting on behalf of the affected policyholders, and Mr Lewis offered to meet her to discuss the matter further, but emphasised that mis-selling victoms shouldn’t get their hopes up about a new compensation deal.

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