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.
We update all our guides regularly. If you are researching pension fraud and we haven't got an exact guide that helps you, keep coming back as we update daily.
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.
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.
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.
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:
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.
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:
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 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:
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.
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.
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.
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.
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.
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.
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.
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Money Savings Advice is an independent editorial company providing detailed information about numerous financial niches with the aim of helping consumers make informed financial decisions. We aim to provide hints, tips and techniques to help you make your money work for you. However, we are not perfect, and we accept no liability if anything we write about goes wrong.
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.
Money Savings Advice is a trading style of Consumer Credit Justice Ltd.
Consumer Credit Justice Limited is authorised and regulated by the Financial Conduct Authority, Reference 834486. We are regulated by the FCA in respect to claims management activities.
You do not need to use the services of Consumer Credit Justice, or any other claims management company, to make a claim. You are free to choose an independent solicitor of your choice.