In the aftermath of the PPI mis-selling scandal that swept the nation, it appears we have another on our hands – mis-sold pensions.
Pension mis-selling is serious business. One poorly advised or risky investment could cause years of hard-earned savings to disappear overnight.
This guide will look at what you need to know about pension investments, examples of what pension mis-selling looks like and what you should do if you think you’ve received bad advice about investing your pension.
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How Big Is the UK’s Pension Mis-Selling Problem?
The UK’s pension transfer market – that is, moving pension pots from one scheme to another – is worth over £80 billion. But the Financial Conduct Authority (FCA) found that only 60% of the pensions transfer advice being given by financial firms was deemed ‘suitable’ in 2018.
As a result, we’ve seen compensation claims for mis-sold pensions skyrocket in recent years as people take steps to get their money back. In 2016, the FCA reported that £20 million had been paid out in pension mis-selling claims. In 2018, this was up to nearly £40 million.
This figure is expected to rise even higher as more and more people transfer their pensions into self-invested personal pensions (SIPPs) each year.
Mis Sold Pension compensation pay-outs where £40m in 2018 and likely to grow substantially over the next decade according to the FSCS.
How to Know if You’ve Been Mis-Sold a Pension
Pension mis-selling covers a whole host of different scenarios. A mis-sold pension doesn’t necessarily have to mean a dodgy product or a corrupt seller, it could simply be that the investment you were advised to make is not suitable for your individual needs or saving goals. Let’s take a look at some of the many forms pension mis-selling can take.
What Is the Legal Definition of Mis-Selling?
While we often talk about pension mis-selling, there is a legal definition in law. Mis-selling is seen as the “deliberate, reckless or negligent selling of products or services in circumstances where the contract is either misrepresented or the product or services unsuitable for the customer’s needs”.
This definition covers an array of different scenarios, many of which have been seen in the pension industry over the years. So, if you recognise any of the above elements and you think you may have been mis-sold a pension or given bad pension advice, it is an important step forward to seek answers.
Bad or Unsuitable Advice Given
While most financial advisors are legitimate, some might not have your best interests at heart. The FCA has expressed concerns over conflicts of interests affecting the quality of advice some advisors they could give.
For example, if an advisor is only paid a commission when they advise someone to transfer their pension to another scheme, they’re more likely to push for that option – even though it might not be the right call for that particular person.
Think back to the pension advice you were given by a financial advisor:
- Was the advice presented to you in a way that was easy to understand?
- Was the advice clear, impartial, open and honest?
- Were you able to take your time and ask questions about your investment options?
- Were you informed exactly what the pension plan would include, if there were any risks you should be aware of and how they could affect you in the future?
- Were you offered a range of investment options, including sticking with the pension scheme you already had?
If the answer to any of these is no, there’s a chance you were given unsuitable advice about your pension investment and you may be able to claim back compensation.
Incomplete Information Provided
It’s a professional advisor’s job to make sure that you fully understand what you’re getting yourself into when you transfer your pension. This means that they should explain exactly how the new pension will work, how leaving your old scheme could affect you and clearly lay out all the information you need to know to make an informed decision.
Without this information, you might end up with a pension that isn’t right for you, your goals and the amount of risk you’re willing to take.
Think back to the conversations you had with your financial advisor:
- Was a full, comprehensive ‘fact find’ carried out on you to understand your situation?
- Were all terms, conditions, exclusions and charges of the plan explained to you?
- Were you provided with all the options available to you to get the best possible deal?
- Were the potential consequences of leaving your old pension plan explained to you?
- Were all the risks of the investment (and their consequences) explained to you?
If you were not given all the information you needed at the time to make a decision you fully understood, you may, have been mis-sold to.
Any reputable financial advisor knows how it important it is to take your time and make an informed decision about your pension. So if you felt pressured or coerced into making a decision quickly or investing in a certain scheme because it wouldn’t be around for long, there’s a chance this would count as mis-selling. Financial advisors should also be impartial – if you felt pushed towards or away from certain schemes, that could also be a problem.
At worst, hard-selling could indicate a pension investment scam. These scams have some common red flags to watch out for:
- You are contacted out of the blue to discuss your pension options
- A time-limited offer was made to you, perhaps involving a courier to be sent to deliver documents that you must sign straight away
- The investment options are unusual, such as overseas property or green energy
- A high (over 8%) return on investment is suggested, promised or guaranteed
- High-pressure sales tactics are used to get you to agree to transfer your pension
If you felt rushed into making a quick decision or pressured into choosing a certain scheme, this is likely to count as pension mis-selling. At worst, it could be a scam.
What to Do if You Think You’ve Been Mis-Sold a Pension
If you feel you’ve been mis-sold a pension scheme or received bad advice when making decisions about your pension, don’t panic – there are a few options open to you.
- Complain to your pension provider or financial advisor directly
- Escalate the complaint to the Financial Ombudsman Service or FSCS if no resolution
- Seek legal advice on pension mis-selling and file a claim for compensation
Bear in mind that there is a time limit on how long you have to complain to the Financial Ombudsman Service. You have six years from when the pension product was sold to you or three years from when you noticed you have been mis-sold to, whichever comes later. So don’t delay. If you think you’ve got a claim, seek legal advice as soon as possible.
How Much Does It Cost to Pursue Compensation for Pension Mis-Selling?
If you believe you have been the victim of pension mis-selling, then you should approach the pension provider/financial adviser in the first instance. Make them aware of your concerns and ask them for a response. In the event that they failed to respond, or fail to cover your particular questions, you can then escalate this up to the Financial Ombudsman Service. Alternatively, more and more people are now looking towards claims management companies to pursue compensation on their behalf.
The majority of claims management companies will offer a “no win no fee” arrangement in the event that they believe you have a strong case. They would also look to secure a “success fee” which would entitle them to an element of your pension mis-selling compensation.
The traditional level is around 25%, although it can vary from case to case. The main positive with a “no win no fee” arrangement is that you are not liable for the claims management company’s costs in pursuing your case, whether you win or lose.
Can I Claim Pension Mis-Selling Compensation for a Deceased Victim?
Very often pension mis-selling will only become apparent many months or even years down the line. There is a general misconception that upon the death of a pension mis-selling victim, their potential to claim compensation goes with them. This is not the case.
Many partners/family members have pursued compensation for pension mis-selling even after the death of the victim. It is very important to remember that any potentially negligent parties who are not held to account are unlikely to change their way of transacting business. As a consequence, there will likely be other victims in the future until they are held to account.
Who Pays Pension Mis-Selling Compensation?
All businesses operating in the UK need to have an array of insurance cover for personal injuries and other issues such as compensation. So, even if the financial adviser has since gone out of business, if you can prove they had an active insurance policy when you were misadvised, then the insurance company is still obliged to pay out any compensation awarded. This is yet another way in which perfectly legitimate pension mis-selling compensation claims fall by the wayside.
Incidentally, research shows that claims management companies are on average able to negotiate compensation well in excess of an individual – often more than double the rate. Even when you take into account the potential “success fee” it is not difficult to see why many people are now turning towards claims management companies.
Quick Mis-Sold Pension FAQs
Many UK pension customers have lost money after investing in burial plot schemes. Compensation claims can be made, but they aren’t straight forward – it will depend on the initial advice you were given and whether it can be argued it was bad advice.
One of the most prominent cases of mis-sold pension investments for UK customers in the last few years is that of The Resort Group. This offered customers the chance to invest in a holiday property in Cape Verde – primarily the Llana Beach Hotel and the Dunas Beach Resort. The promised potential returns were outstanding – up to 10% a year. But this should’ve simply served as a red flag.
The Germany Property Group is an unregulated property investment scheme. That means that it’s a scheme you can choose to invest your pension fund in but, as it is unregulated, you are doing so at your own risk.
A SIPP is a Self-Invested Personal Pension. As with all pensions, there is some potential for SIPP products to be mis-sold. Victims of SIPP pension scams can report them and claim compensation.
If you’ve received bad pension advice, you could be entitled to compensation of up to £85,000. You’ll claim this from the Financial Services Compensation Scheme if you’re eligible. You’ll need to make a claim for bad pension advice you’ve received.
How Can Money Savings Advice Help You With Making a Mis-Sold Pension Claim?
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold pension and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.