According to data from the Financial Services Compensation Scheme (FSCS), mis-sold pensions led to compensation payouts exceeding a whopping £40m in 2018, double the payouts made in 2016. 2019 has seen a continued rise in the number of investors making compensation claims after being misled by advisers regulated by the FCA into investing in high-risk or poor performing products. 

There is currently an estimated £10bnworth of poorly invested pensions which were mis-sold to consumers by unscrupulous financial advisors. This has resulted in a meteoric rise in claims and increased concerns over the quality of investment advice being received by pension holders. Experts fear mis-sold pension claims may overtake the tsunami of PPI claims recently witnessed. 

As well as this spike in payouts, there has been a seven fold increase in the activity on pension transfers in just three years. £37bn of pensions were moved in 2018, compared to just £5.4bn in 2014. 

Poor Investment Advice on a Massive Scale 

The rise in pensions mis-selling claims shows just how many people have lost out due to poor advice. Thousands of pounds of hard earned money have been missed out on, due to people being ill informed. This can be devastating for people who are preparing for retirement. 

Increased transfers of pensions over the past three years are a result of new pensions freedoms which came into effect in 2014. The easing of pension regulations led to a large influx of retail investors eager to earn improved returns for their retirement funds but lacking the experience to choose the most appropriate opportunities. 

Many consumers are confused about their options, with all too many withdrawing huge amounts of their pension pots without taking proper financial advice. Research shows that almost a third of pension drawdowns are taken without professional advice, leading to many investors receiving unsuitable information. 

Less Than 50% of Financial Advice Is Suitable 

The FSCS is acutely concerned over the quality of advice given to those who do perform due diligence when seeking to reinvest their pensions. Mis-selling has been identified in both regulated and, increasingly, in unregulated advisors, with companies promoting illiquid, risky investments. 

The Financial Conduct Authority (FCA) has been investigating pensions transfers and has found that less than 50% of the advice it reviewed was deemed to be ‘suitable’. 

Could you claim? 

Potential victims of mis-sold investments are being urged to check if they can reclaim some of their money. The government has already set up a fund of £120m to provide compensation to those who have lost out. 

Typically, a mis-sold pension holder will have been promised huge returns of up to 20% a year. Investments may have been made in ‘get rich quick’ schemes, such as airport parking, green energy projects and holiday homes. 

The FCA say that almost 10% of savers believe their pension may have been mis-sold and are advising people to raise a complaint as soon as possible to ensure the best outcome. 

The FSCS has set a maximum sum of £50,000 per claim, although this is set to rise to 75% over the next nine months, as claims are predicted to rise. 

Average compensation claims are currently sitting at around £25,000 for private pensions and at £50,000 for final salary pensions. Experts believe that the total figure for mis-sold pensions will end up being in the region of £10bn. 

Those with claims larger than £50,000 can take their case to the Financial Ombudsman. They have the ability to raise the ceiling and to add another £150,000 to the final claimed amount. 

Some savers may have lost out even more, investing with companies who have now disappeared, along with their savings. 

Scammed Out of Your Pension? 

As much as £120m of retirement savings have been lost, thanks to a rise in fraudulent activity, known colloquially as pension liberation scamsA ban on cold calling relating to pensions has aimed to curb poor investment choices through preventing contact. But many fear this does not go far enough. 

Whenever an IFA or a financial services firm is selling a pension product to a customer, they must conform with very stringent rules and regulations. This includes making sure they collect the proper information from you and advise you of all of your options. For example: 

  • Your current and historic health and medical situation must be evaluated as part of the product selection process. 
  • Your advisor must make sure to give you all the information that you need to make a proper decision. 
  • You must be warned when you are offered a potentially risky investment proposition such as transferring your pension into an SSAS or SIPP, or investing in property syndication projects, or carbon credits. 
  • The advisor must provide you with a full range of product options, and not influence your decision by offering you only those which profit the IFA or financial firm. 

These are just some of the aspects of the FCA code of contact for Financial Advisors. We recommend you contact our advisers at CLAIMS DIRECT, who will be able to help you work out if you were missold a pension. If you were and are entitled to compensation under the FSCS, we will make sure you get the money you deserve. The process is straightforward, taking an average of 12 weeks to complete and once you have supplied us with the information we need, there’s nothing more you need to do.  

If you have been a victim of poor financial advice, we may be able to help you. CLAIMS DIRECT has a very high success rate in getting investors compensated for mis-sold pensions. Find out if you’re eligible to make a claim by contacting CLAIMS DIRECT TODAY! 

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