N&P had Keydata concerns four years ago

The Norwich and Peterborough (N&P) building society wrote to its Keydata customers as early as 2006 with concerns about the clarity of the provider's marketing material.

A letter sent by N&P in May 2006 states some of the paperwork it issued may "confuse rather than clarify the key elements of this contract", the Eastern Daily Press reports.

About 3,500 pensioners who invested in Keydata following consultation with N&P financial services fear they may lose their life savings, ranging from £5,000 to more than £100,000, after the firm's collapse.

Some are preparing a group legal action against the N&P while others are lobbying MPs for support in their challenge.

Gareth Fatchett, partner in Regulatory Legal which is representing hundreds of N&P customers, says: "To realise the risk profiles could have been confusing in 2006 begs the question why the N&P continued to sell these products. Surely, the alarm bells should have been ringing loud and clear?

"We also have clear evidence of clients being taken from widely diversified portfolios to 100% in Keydata. On any analysis this has to be unsuitable advice."

The letter is part of the evidence being collected by Regulatory Legal to support claims customers were mis-sold products and were misled over the risk the products presented.

The claims will centre on the quality of the advice provided by N&P.

A spokesman for N&P Laura Hogg says the clarification letter did not mean the initial advice had been flawed.

"We went through two stages of due diligence and it was decided that, although the initial paperwork was correct, it wasn't as clear as it could be. Nobody came back to us with any concerns at the time."

N&P has offered interest-free loans, which could total up to £2m to 1,600 customers, to cover the shortfall in income payments which have stopped since Keydata's collapse, but not the capital tied up in funds. However, the building society said this offer was not an indication of legal liability.