Pension mis-selling often occurs when individuals are urged to transfer from safe and secure defined benefit (DB) pensions, otherwise known as final salary pensions, into unsuitable schemes. Last year, the UK’s financial regulator, the Financial Conduct Authority (FCA), wrote to thousands of people across the UK, advising them to lodge compensation claims for pension mis-selling. The advice came after the FCA became concerned about the number of transfers made from final salary pensions since 2015.
In 2015, to combat the challenges of an ageing population, the government introduced new pension freedoms.
The changes were aimed primarily at individuals with defined contribution (DC) pensions. These pensions build up a pot of money that provides an income after retirement, but there is no guarantee how much that income will be. The 2015 changes gave people aged 55 and over greater flexibility about when and how they could access their money (with access to a lump sum).
The changes were not designed to impact those on DB schemes. Mainly because it is usually in their best interests to keep their current pension as this promises a guaranteed income on retirement. But the changes made DC schemes appear more attractive, so many people were tempted to switch.
To stop people from making bad financial decisions, the government required anyone in a DB scheme with benefits worth over £30,000 to take independent financial advice before transferring their pension. Despite this, the number of DB to DC pensions has risen steadily since 2015, and the FCA is worried. Not least because it fears people have received poor-quality financial advice when switching.
According to the regulator:
Even with repeated warnings from the FCA, in 2020 a significant amount of pension transfer advice was still of an unacceptable standard. Recognising the harm this improper counsel was causing, in 2021 the FCA wrote to over 2,600 people to inform them that they could be due compensation.
The FCA contacted people who transferred from a DB pension after 2015 and whose independent financial advisory firm provided unsuitable financial advice (and was now in liquidation).
But not everyone with a mis-sold pension has been contacted.
The mis-selling of DB pensions is a national scandal, with thousands losing money as a result. But DB pensions are not the only pensions to be mis-sold.
Over the last few years, we have seen a considerable increase in other types of unsuitable pension transfers, including into SIPPs (Self-Invested Personal Pensions) and Qualifying Recognised Overseas Pension Schemes (QROPS).
If you transferred your DB pension into another pension scheme, you could be owed compensation. Typical signs of pension mis-selling include where:
The FCA believes most people are better off keeping their retirement fund in a DB scheme. But too many individuals have been wrongly advised to transfer. We agree with the FCA that action is needed to address this wrong.
Encouraging people to act, the FCA has warned those affected that they will end up with less money during their retirement if they do nothing. We echo this advice.
Representing people in England and Wales, at Keller Postman UK, we help our clients claim back what they are due following pension mis-selling. Making a claim with us is straightforward. It is free to sign up and we act on a strict no-win, no-fee basis, so, you won’t pay us anything upfront.
If you believe that you have been mis-sold a pension, contact us to find out more about what making a claim involves. If you are not sure if you have a claim, we can find this out for you.Contact our specialist team today