What to Do if a Financial Advisor Advises You to Move Your Pension Into a SIPP?

Laura Broad[1]

Laura Broad

Money Savings Advice Financial advisors and SIPPS

With work or personal pensions, a pension provider decides where your money is invested. With a self-invested personal pension (SIPP), you're free to choose where your pension funds are invested yourself. But with more investing power comes more responsibility.

A financial advisor can help you transfer your funds out of a workplace pension and into a SIPP.

There are pros and cons to this, which it's important to be aware of. If you haven't had these explained to you before, then there's a chance your SIPP was mis-sold to you.

Looking for other information on Pension fraud? This guide has info on 'Finacial Advisers and SIPPS, can you trust them?' We have also writen extensively about:

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Advantages of a Self-Invested Personal Pension

The obvious one is greater transparency over where your money is invested. With a SIPP, you can invest in a wide range of financial assets - stocks and shares, bonds, real estate, green energy providers and more. This level of freedom may be attractive to people wanting to make more ethical investments that align with their personal morals.

If you're a savvy investor who keeps an eye on financial trends, there's a chance you could be financially better off making your own investments too. You can diversify where your money is invested and also choose to only pay in as much as you want to it, with both regular and one-off payments possible.

When the time comes to start taking money out of your SIPP, it's tax-efficient. You're able to draw up to 25% of it tax-free after you turn 55. You're guaranteed at least a 20% tax bonus, with higher-rate taxpayers enjoying a further 25% deductible tax relief on SIPP contributions.

A SIPP pension may also be an attractive option for people to start saving for retirement early. As long as you’re under the age of 75, you can open a SIPP - some providers will even allow parents to open them for children under the age of 18.

Disadvantages of a Self-Invested Personal Pension

While with a SIPP you get a level of freedom you don’t get when a pension company invests for you, this is a double-edged sword. Managing your own pension investments often comes with higher risks of losing your money than if a professional does it for you.

A SIPP lets you invest in pretty much whatever you want. Some of these investments, like overseas property, can offer lucrative high returns. However, they also carry a lot of risks - high-risk investments could mean you end up losing more than what you put in to save.

Some schemes you can invest in with a SIPP are not regulated by the Financial Conduct Authority (FCA). Investing in non-regulated products puts your money in danger. If anything goes wrong here, you won’t get your money back. You have no FSCS protection and won’t be able to get help from the Financial Ombudsman Service if things go sour.

Of course, it is possible to get financial advice to help you with your SIPP investments. But again, this sometimes comes at a cost. There is always the risk that poor advice, a wrong decision or a mis-sold investment could put your hard-earned cash in danger. SIPP pensions are also a common target for pension scammers looking to get you to part with your money.

Can I Be Advised to Move My Workplace Pension Into a Self-Invested Personal Pension?

In short, yes. But whether the pension transfer is a good idea or not depends completely on your personal circumstances, your future pension savings goals and the level of risk you are willing to take with your investments. These are all factors that a financial advisor should take into consideration when advising you on the products available to you.

If you’re a member of a defined benefits pension scheme - sometimes called a final salary or career average pension scheme - you legally need to seek advice from an FCA-regulated financial advisor before you transfer your pension if you’ve got over £30,000 at stake. Here, the advisor has to check that the transfer offers good value and is in your best interests.

However, the FCA has identified that conflicts of interest are common in this area. If a financial advisor is only paid if you transfer your pension, there is a clear motive to get you to move some or all of your pension funds into a self-invested personal pension. This might not always be in your best interest, so the transfer could be classed as pension mis-selling.

How to Spot Pension Mis-Selling

  • You were cold-called or contacted out of the blue to discuss your pension options
  • You weren't asked about your personal situation before a product was recommended
  • The terms, conditions and risks of the investment weren't properly explained to you
  • You weren't told about any fees or charges involved in your investment
  • You were pressured into making a decision or money transfer quickly
  • You were recommended a scheme that's higher risk than you are prepared to take
  • You were advised to transfer your pension with little evidence it would benefit you
  • You were advised to invest in high-risk schemes which are often unregulated, such as overseas property, carbon credits and green energy schemes

If any of these happened to you, it's possible your pension was mis-sold.

What to Do if Your Self-Invested Personal Pension Was Mis-Sold

As a starting point, you should consider complaining to your pension provider or financial advisor directly. Then, if a resolution can't be reached or you aren't happy with the response you got back, you can escalate your complaint to the Financial Services Compensation Scheme or the Financial Ombudsman Service.

If your pension was mis-sold, you may also be able to claim compensation. You can make a claim even if your pension value hasn't been affected yet - the mere act of being mis-sold is often enough for a successful pension claim. Seek legal advice to explore how to protect your pension from further harm and claim compensation if required.

Should You Employ the Skills of a Claims Management Company to Pursue Compensation?

The concept of transferring a works pension (for example) into a SIPP is complicated, to say the least. While there are regulatory routes you can take to claim compensation; sometimes, it is useful to look at the wider picture. It may be that the actions of your financial adviser had a knock-on effect on other areas of your life and investments. Might you be entitled to compensation for those additional issues?

Simple Claims Can Very Quickly Become Complicated

Over the years, we have seen many occasions where relatively simple compensation claims in relation to pension transfers have suddenly become very complicated. It is very important to provide as much evidence as possible which normally starts with a paper trail.

Unfortunately, many people do not seem to keep records of their pension movements, pension advice and pension actions. Therefore, if you are unable to locate the documentation to prove negligence, it can be difficult.

Money Savings Advice Tip

If you feel you have been the victim of pension fraud and have lost out financially you could be entitled to compensation. Our tip is to speak to a professional who can help you understand the process of claiming compensation and can look after the compensation process on your behalf.

How Do You Find a Claims Management Company?

The UK pension market is huge, with more than £4 trillion of pension investments, and as a consequence, it is a huge area of the financial compensation sector. Therefore, you should be able to find a claims management company with experience in the world of pension/finance.

It is very important to be aware of legal requirements, strong evidence and also putting your case across in the best possible light. These are all issues which are second nature to claims management companies, and certainly leading factor as to why they have become so popular in recent times.

Discussing Your Case With a Claims Management Company

Once you have put together as much evidence as possible, it is time to approach a claims management company for their advice and feedback on your case. They may advise additional evidence, they may suggest dropping the case, or if they believe you have a minimum 60% chance of success, they may offer to take on your case.

We have seen cases in recent times where certain companies have been prosecuted numerous times for the same crime, pension plan misadvice. While you would still need to provide evidence, the fact that there is documented systemic flouting of the regulations would certainly strengthen your case with such an advisor.

How Much Does It Cost to Work With a Claims Management Company?

This is one of many misconceptions in the financial damages sector, the idea that claims management companies are expensive. In reality, if they believe you have a strong case, they would likely offer you a “no win no fee” arrangement.

This effectively removes your obligation to cover claims management company fees in relation to your claim. However, in exchange for the “no win no fee” arrangement, they will request a success fee.

What Is a Success Fee?

A success fee is an arrangement between the claimant and their claims management company that entitles them to a percentage of any compensation received. The traditional level for a success fee is around 25%, but it will vary on a case-by-case basis.

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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