Comprehensive Guide to Mis-Sold Pension Compensation Claims

Laura Broad[1]

Laura Broad

Money Savings Advice Mis-Sold pension compensation claims

Forget PPI; the UK has a new financial mis-selling scandal on its hands - pensions. As the dust settles from the last scandal, regulators are seeing a dramatic rise in compensation claims from people who were given bad advice or mis-sold pensions.

If it turns out you were mis-sold a pension, you could be owed compensation. And you wouldn't be alone. Just in 2018, the compensation paid out for mis-sold pensions was to the tune of £40 million, with double the number of claims from two years before.

So what does that mean for those of us with pensions? Read on to find out how you can spot pension mis-selling and how to make a mis-sold pension claim if you've been affected.

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Commonly Mis-Sold Pensions

In 2015, the UK government brought in changes called 'pension freedoms' which meant you could do more with your pension funds. Unfortunately, this also opened the door to new levels of mis-selling as pension transfers began to boom.

Pension Transfer From Workplace to Personal Scheme

This is the most common area we see pension mis-selling. If you're an employee in the UK, it's likely you and your employer contribute to a workplace pension.

There are two different types of workplace pension scheme:

  • Defined contribution scheme. These are the most common. Here, you and your employer pay a percentage of your salary. The pot is managed by a pension provider who invests the money for you until you can draw it out, starting at age 55.
  • Defined benefit scheme. These are sometimes also known as 'career average' or 'final salary' pension schemes. Here, the pension provider will promise to give you a certain amount of money each year after you retire. Instead of being based on how much money you pay into the pot, this figure depends on pre-agreed things like how long you've worked for your employer and the salary you're on.

The majority of pension mis-selling comes from financial advisors recommending people move their money out of a defined benefit scheme and into a personal pension plan, usually a self-invested personal pension (SIPP). If it turns out that this was a poor recommendation or that you were given unsuitable advice, you may be owed compensation.

Mis-Sold Self-Invested Personal Pension

SIPP schemes give you more freedom to choose where your money is invested, be that stocks and shares, property, ethical companies or even green energy like wind farms. This allows experienced investors to take more risks for potentially higher reward.

But there's a catch. SIPPs are at high risk. Some of these investments are unstable, and some aren't even regulated by the FCA - if you lose your money to one of these, there's no getting it back. There's even debate whether SIPPs should be recommended to the general public.

If a financial advisor recommended you move some or all of your pension into a SIPP, then there's a chance it could've been mis-sold, and you may be able to make a claim.

What Does a Mis-Sold Pension Look Like?

While pushy salespeople or dodgy schemes might be the first things that come to mind when you think about pension mis-selling, it doesn't have to be that sinister. Misguided advice from an inexperienced advisor or a failure to carry out a thorough enough fact find into your personal circumstances could be enough to warrant a mis-sold pension claim.

While pension mis-selling comes in all different shapes and sizes, here are some key things to watch out for.

You Were Given Unsuitable Advice

Whether down to inexperience, negligence or a conflict of interest, it's possible that an advisor may have given you unsuitable advice for your personal circumstances. Some warning signs here include:

  • Confusing advice that wasn't presented in a clear, easy to understand the way
  • Not being given time to go away and consider your options or ask questions
  • Not being informed exactly what your new pension plan would include, the risks you should be aware of and how they could affect your pension balance in the future
  • Being given advice that wasn't honest or impartial - feeling pushed towards making a certain transfer, for example

Incomplete Information Provided

It's an advisor's job to make sure that you fully understand your pension options. They need to fully understand your needs in the first place to do this. If they didn't, whatever they sold you could be mis-sold and claimed against.

Some warning signs here include:

  • An advisor making a suggestion or recommendation on a pension plan without conducting a thorough ‘fact find’ into your individual circumstances
  • Not being asked about the level of risk you were happy to take with your investments or about your pension savings goals
  • The terms and conditions of the pension plan weren’t explained to you fully
  • There are certain exclusions or changes in your plan that weren’t explained to you

Hard-Selling Tactics

A reputable financial advisor should give you plenty of time to weigh up all of your options and will not push you towards making any decisions. However, this is not always the case. You may have been mis-sold a pension if any of the following occurred during the process:

  • You were contacted out of the blue or approached about your pension options
  • High-pressure sales tactics were used to get you to agree to transfer your pension quickly, such as saying the investment opportunity could be offered to someone else if you don’t act now or sending a courier to bring you documents to sign immediately
  • Being promised or guaranteed high rates of return on your investment if you act now - any return over 8% should be ringing alarm bells

These are all also trademarks of pension scams.

How to Make a Mis-Sold Pension Claim

If you think you received inaccurate, unsuitable or misleading advice when taking out your pensions plan, you could be owed compensation. You may want to seek advice from a mis-sold pensions specialist to assess your case and help you make the claim.

While every situation is different, the mis-sold pension claims process is likely to involve complaining to your financial advisor or pension company directly. If no resolution is reached, you can ask the Financial Ombudsman Service or the FSCS for further support.

Should You Use the Services of a Claims Management Company to Seek Compensation?

What you will find with regards to mis-sold pensions and transfer advice is that it can take many years for the full impact to crystallise. It is therefore important to seek the services of a claims management company with experience in this area.

As we have mentioned above, there are numerous regulatory paths down which you can pursue compensation, but with a claims management company, there may be other damages you can look to secure.

How Do You Prove Inappropriate Pension Advice/Transfers?

First of all, when taking pension advice, it is important that you seek the guidance of regulated advisers. In the event that their advice was seen as negligent/inappropriate, you will have the full backing of the regulator when pursuing compensation.

Proving negligence/inappropriate advice can be challenging and would normally require a paper trail. As a consequence, it is worth reiterating the fact that when taking the advice, you to request this in writing/email so you can keep a record. Verbal conversations can be misunderstood, are difficult to prove, and on their own can be seen as one person’s word against another.

How Do You Appoint a Claims Management Company?

When looking for damages, the first thing to do is to gather your evidence and approach a claims management company. They will look at your case, and if they believe you have a minimum 60% chance of success, they would offer to pursue your claim.

It is highly likely that they would offer a “no win no fee” arrangement when pursuing damages on your behalf. This ensures that you are indemnified from any costs incurred by the claims management company pursuing your case.

Money Savings Advice Tip

Claiming compensation for pension fraud can be difficult if you are doing it on your own. You would need to navigate the compensation claim process and deal with regulatory bodies which some people find confusing and daunting, which is why we recommend speaking to a specialist claims management company who guide you through the process.

What Is a Success Fee?

As part of their “no win, no fee” arrangement your claims management company would seek to negotiate a success fee. This would entitle them to a percentage of any compensation awarded - it tends to be in the 25% bracket.

In effect, this is the reward/payment for pursuing your claim free of charge. This is why there is a forecast 60% cut off point so that the claims management companies are only pursuing strong claims.

Can You Claim Damages for Pain and Suffering?

As well as compensation for financial loss linked to inappropriate pension advice/transfers, you may be able to seek other damages. For example, if your income was drastically reduced in the short-term as a consequence of mis-sold pension advice, you may have a claim for compensation.

This is the benefit of bringing in a claims management company. They have experience in pursuing straightforward compensation as well as additional damages.

Claims Management Companies and Holding Negligent Third Parties to Account

Obviously, for claimants, the focus is upon compensation for pension mis-selling and inappropriate advice. However, if you take a step back and look at the bigger picture, there are further long-term consequences.

It is only by holding negligent third parties to account that these companies are prompted to make changes and regulators encouraged to get more involved. Failure to hold these parties to account would likely see more people suffering similar financial distress in the future.

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.

Money Savings Advice Author Laura Broad

Laura Broad

Laura is a professional content writer and learning designer, passionate about empowering people through straightforward, jargon-free content. When she's not reading or writing about all things personal finance, you can find her in the gym, barbell in hand.

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Money Savings Advice is a trading name of RMM Digital Publishing Ltd. Registered trading address, First Floor, 85 Great Portland Street, London, W1W 7LT. Trading in England and Wales, company number 11550143 with data protection number ZA747669.

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