THE Sunday Times is seeing mounting evidence of banks selling inappropriate, commission-driven investment products to elderly  people.

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As the Bank of England held base rate at 0.5% for the 16th consecutive month last week, leaving many older people starved of  income, the Financial Ombudsman Service (FOS) tells us of a rising number of complaints about investment products sold to the  over-65s, fuelling fears of a new mis-selling scandal.

Previously unpublished data from the FOS reveals that complaints from people aged 65 and over concerned about investment  products sold by banks soared by 19% last year, from 1,495 to 1,777. Unit-linked bonds were the most common cause for  complaint. Of all investment complaints about Alliance & Leicester and Clydesdale in the second half of last year, 70% were  resolved in favour of the consumer, while the FOS upheld 65% of complaints against Barclays and 62% against Bank of Scotland.

The Future of Banking Commission, a cross-party group chaired by Tory MP David Davis and featuring former Treasury committee  chairman John McFall, is today publishing its report recommending banking reforms. It is calling for a blanket ban on sales  commission for frontline bank staff in order to stamp out this mis-selling practice as investment products routinely pay  higher levels of commission than other products.

Both the FOS and Which?, the consumer group, say they have seen an increasing number of examples of mis-selling practices  involving investment products this year. For instance, one 78-year-old woman who complained to the FOS had been persuaded to  withdraw £40,000 from a cash savings account and invest it in a long-term equity-based investment fund by her bank, even  though she had stressed that she did not need income and wanted to access her money within six months to buy a property. The  investment fell in value by £5,000.

Another woman in her 70s who complained to the FOS went to her bank branch hoping to open a two-year, fixed-rate cash savings  account. However, she was persuaded to put £60,000 in a five-year “guaranteed” investment bond linked to the stock market.  When she cashed in the bond three years’ later to pay for essential house repairs, the capital had dropped significantly. The  FOS upheld the complaint on the basis that the woman had been given inappropriate advice.

Teresa Fritz, head of the Which? Money Helpline, said: “Complaints about investment products from older people have been  coming in thick and fast. We spoke to an 84-year-old man last week who had gone to his bank to put money from his late wife’s  estate ‘somewhere safe’ but was sold a corporate bond fund. He had told the bank that he was in poor health — and a man like  that being told to put all his money in the stock market is truly terrible.

“We can’t prove that all sales like this are down to commission but it has got to be a big factor — staff would take more  care in their recommendations otherwise. There’s no question that this is the next mis-selling scandal.”

The Future of Banking Commission asked several banks — including HSBC, Lloyds and Royal Bank of Scotland — for details of how  much they pay branch staff in bonuses and sales commission. HSBC said variable pay accounts for 9% of overall salary for its  branch workers, while Lloyds said that salary “typically accounts for at least 90% of the compensation package”.  Taxpayer-backed RBS said it rewarded staff according to customer service.

Commission member Peter Vicary-Smith, chief executive of Which?, said: “We have reason to believe that many banks pay higher  sales commission than this. During evidence, we had a branch staff member of one bank who said that her sales commission  could be up to 40% of her total remuneration package. Sales commission is an endemic problem in this industry and it has to  go.”

The British Bankers’ Association said: “We agree with many of the objectives for banking reform that have been set out in the  report, which we will now review in some detail.”