A Complete Guide To Mis-Sold Pensions – Get Free Help

Did someone approach you out-of-the-blue saying they could offer you a pension product that could ‘better’ the one you already had?

Did they get you to change the type of pension you had, and you have since realised you received bad or inappropriate advice?

Did they tell you to transfer out of one scheme into another without explaining the risks or costs?

Did you feel pressured, bullied or pushed into signing up for a pension product that you did not want or need, or feel it was not the right choice for you?

Did the salesperson tell you there was a ‘time-limited’ special offer to sign up straight away, without giving you the time to consider all your options?

It is obligatory for any adviser or broker to carry out a full and detailed assessment of your financial situation and your attitude to risk before recommending or commencing any financial product, and that includes pension products.

If you were not asked to provide these details for a full review, or were not given a key features document explaining how your pension works, then you may be able to make a claim.

Investment products, including pensions, almost always carry a level of financial risk. There are some exceptions, but the value of most investment and pension funds fluctuate on a daily basis.

Unless you are in a defined benefit scheme (such as a final salary scheme operated by your employer) you should have been told that the value of your pension fund can go down as well as up.

Pension funds are often subject to market volatility so, where it is relevant to your plan, you should have been made aware of these risks.

Financial advisers and brokers are required to tell prospective clients the fees or commission rates they will get from selling you the pension, as how much they get paid may affect the value of your policy.

It is also important that they disclose if they are truly ‘independent’ or ‘tied’ to a particular pension provider, as that determines which products they can compare and recommend. They must not advise you to commence one type of plan, over a more suitable one, just because the other pays them a higher commission.

Financial advisers should recommend a product that it suitable for each client, based on their individual circumstances, and consider their attitude to risk.

If they failed to do this, or recommended a specific product based on how much they got paid rather than a more suitable plan, it can constitute bad advice. They should also fully explain how the recommended pension plan works, along with its advantages and disadvantages, so that you can make a fully informed choice.

If your pension fund has taken a nosedive and you believe this is directly connected to receiving bad advice at the point of sale or transfer, perhaps you have a case for a mis-sold pension claim.

Small Self-Administered Schemes (SSAS) are a form of defined contribution pension scheme, designed for key employees within a business, such as company directors.

High risk or unregulated investments, such as funding the building of property developments abroad appear to have recommended to many clients without their full understanding of the risks.

Whilst a SSAS enables client’s greater control over their investment portfolio, some corrupt brokers took advantage of this and steered inexperienced investors to effectively ‘gamble’ their pension savings on wholly unsafe and unregulated funds.

Some of these investments are now utterly worthless, meaning individuals will have to work for longer than they originally planned or severely restrict their retirement plans because of a mis-sold policy.

Self-Invested Personal Pensions (SIPP) were originally designed for individuals with solid experience and a good knowledge of investments, to have more control over their pension policy and pension fund.

However, as with SASS clients, many people were unfortunately duped into investing in high-risk unregulated investments, without realising just how much they could lose if things went wrong.

The State Earnings Related Pension Scheme (SERPS) is sometimes referred to as the ‘Additional State Pension’. It was intended to top-up the basic state pension and provide a little extra in retirement for those who qualified.

However, vast numbers of people were advised to ‘Contract-Out’ of this government scheme, in favour of putting their National Insurance rebates into a Personal Pension, Company pension, or ‘Rebate Only’ plan.

Unfortunately, thousands of people who did this would actually have been better off staying in the government scheme and so there are numerous compensation claims currently being made in this specific area of mis-selling.

If you received professional financial advice to ‘Contract-Out’ or ‘Opt-Out’ of SERPS and this has resulted in a financial loss of pension benefits, you may have a claim.

However, there is specific and strict criteria for a claim to be considered, as follows ..

• The advice you received must have resulted in you opting out of SERPS between 1st July 1988 and 5th April 1997
• You must have been over 45yrs old (for a man) or over 40yrs old (for a woman) on the date you contracted out of SERPS .. known as the ‘pivotal ages’ over which it was unlikely that investing monies elsewhere would out-perform the benefits of remaining in SERPS
• You must have been earning £10,000 or more, each year, for the period you wish to claim

If you meet all the above criteria and suffered a loss in pension, compared to having stayed in SERPS, you can file a claim for compensation.

An ‘annuity’ is the name given to the regular amount of money paid to you from a pension fund.

There are much greater options available for people to access their pension fund these days, but in the past there was only really one main option; take the maximum tax free lump sum (if desired) and ‘buy’ an annuity (i.e. a regular pension income) with the remainder of your pension fund.

Data from the FCA suggest that hundreds of thousands of customers may have been ‘mis-sold’ their annuity and, if any of the following criteria applies to you, you may be eligible to make a claim. Please contact us if you wish to discuss your case in more detail.

Your pension provider didn’t tell you that you can shop around the whole annuities market with your fund or told you that you ‘must’ have your pension income from them

Many people were unaware they had an ‘open-market option’ when buying an annuity. This basically means you had the right to shop around for a better annuity rate than the one being offered by your existing pension company.

Annuity rates could vary quite significantly between different providers, so it is possible that you could have got a higher regular income from another provider, with the same amount of pension fund. If you were not told that you had this option, you could be eligible to make a claim.

They didn’t ask you sufficient questions about your health, medical history or lifestyle

When providers offer a standard annuity rate, it is based around average life expectancy and other assumptions.

However, whilst being a smoker or being in poor health would cost you more to buy life insurance (as your risk is higher), it has the opposite effect on annuity rates. Someone who smokes heavily or has an unhealthy lifestyle for example, or suffers from a potentially life shortening or terminal medical condition, is likely to be eligible for a better (or ‘enhanced’) annuity rate than someone in good health.

This is because annuity providers assume they will be paying the pension income for someone with poor health for a shorter period, compared to that of an average or healthier person (stark, but true!).

This is particularly important and relevant if someone has a serious medical condition like cancer, heart disease, or a life-limiting illness when initially buying the annuity, as they could have missed out on an enhanced annuity rate and received a higher pension income. Which could mean a loss of income running into thousands of pounds.

You were advised to buy a ‘single life’ annuity with your pension fund, when a ‘joint life’ one would have been more suitable

It is important that the adviser carefully considered your personal circumstances and recommended whether it was more appropriate to sell you a joint life annuity, rather than just a single life annuity.

Joint life annuities reduce the amount of pension income for the primary client, but it would then continue to be paid to the surviving spouse on the death of the primary client, giving the survivor a regular pension income that would otherwise have stopped.

This type of pension mis-selling involves an adviser recommending a transfer from a company final salary scheme (also known as a defined benefit scheme) to a personal pension or other individual plan.

Whilst personal pensions may offer the policyholder more control over their pension monies, final salary schemes are considered the ‘gold standard’ of pensions and there are very few circumstances under which a transfer from one to the other would be deemed suitable or in the client’s best interest.

Final salary schemes guarantee a pension income based on age, number of years’ service and an employee’s final salary, often along with early ill-health retirement provisions and other benefits. Whereas a personal pension has no guaranteed level of pension income and is vulnerable to investment market fluctuations.

If you were advised to move your money away from an Employer’s final salary scheme and have suffered financial losses of because of it, you may have a claim for compensation. Also known as Defined Benefit mis-selling, mis-sold Workplace Pensions or DB Transfers.

In addition to the somewhat questionable transfer of final salary scheme benefits into a personal pension, there are also other types of pension transfers that may also have been mis-sold.

Any transfer of pension funds from one pension provider to another incurs charges and commission paid to an adviser for their ‘recommendation’. Charges affect the overall value of the pension fund and can do so for many years, so a full in-depth review should be conducted before an adviser instructs you to proceed.

There are some instances where a pension transfer could be considered a beneficial option and, of course, not all advisers have dubious intentions or ulterior self-motives when giving out pension advice. But, if you have lost out because of a pension transfer that was not fully explained, or feel you have grounds for a mis-selling complaint, we can help.

Standard Life Assurance has long been considered a heavy-weight in the pensions market and yet, in 2019, it was fined almost £31 million by the Financial Conduct Authority (FCA) for the large-scale mis-selling of pension policies to retail customers.

In fact, the initial misconduct penalty was £44 million, but because the company accepted the FCAs findings, the fine was reduced.

The FCA’s investigations into pension mis-selling at Standard Life Assurance found that between 2008-2016, the company’s salesforce were paid large bonuses for selling products to the public, risking the chance that call-handlers would sell unsuitable products in return for high rewards.

The bonus structure in place increased the likelihood of staff using pressure sales-tactics and meant they could put their own financial interests ahead of fair and equitable customer outcomes.

Standard Life Assurance were also reprimanded for a lack of proper systems and controls, including a failure to monitor or review sales calls for unfair practices. As of 2019, over £25 million had been paid out to customers who were affected by their mis-selling of pensions, with a further £70 million expected to be paid out in compensation over future years.

As mentioned in an earlier section, several pension providers have been found guilty of mis-selling annuities to their clients, either by failing to advise that they can use their fund to buy a pension income elsewhere, or failing to discuss ‘joint life’ annuities (where relevant), or by failing to offer an ‘enhanced’ annuity for a person in poor health.

And, back in 2014, the UK’s largest insurer Aviva were publicly disgraced for doing exactly that.

An investigation found that Aviva had knowingly sold a ‘standard’ pension annuity policy to an elderly client, despite having already been informed of her serious health conditions.

Therefore, as Aviva were aware of her medical status, she should have been given an ‘enhanced’ annuity rate, but they did not. That decision effectively reduced the pensioner’s retirement income by thousands of pounds and highlighted a situation that may have happened to many thousands of others across the annuity market.

The client contacted Aviva some years later to review her policy and obtain the higher income she was entitled to, having realised her policy had been mis-sold, but her request was refused.

Only after further investigation, and perhaps due in some way to the unwelcome media coverage of the issue, the pensioner was finally compensated by Aviva for her losses and had her pension income increased accordingly. And when they carried out an internal review, to establish what had happened, Aviva found a further 250 clients who had also been mis-sold the wrong type of annuity.

Experts at the time felt that this was only the tip of the iceberg and official figures suggested that across the whole pension annuities market, pensioners could be missing out on a staggering £230 million per year, by being locked into poor or mis-sold annuity deals.

Another large company who found themselves caught up in the mis-selling of pensions was Royal London.

After a thorough investigation, the regulator found that thousands of customers had been wrongly advised, either by a financial adviser or the company’s own agents, to move their workplace pension to an alternative pension plan with Royal London.

In most cases, transferring from an employer’s final salary scheme to a personal pension is not in the best interest of the client and, as such, often falls under the banner of mis-selling. Many clients were not advised of the risks of doing this, such as the loss of their employer’s contribution or the loss of guaranteed pension benefits. And some found they were pressured into doing so.

This well-known giant of the pensions arena also hit the headlines in 2019, for failing to provide their customers with full and transparent information when changing their Prudential pension fund into the regular pension ‘annuity’ at retirement.

The FCA investigated their sales practices and procedures and found that between July 2008 and September 2017 the company had consistently failed to inform clients that they had the option to ‘shop-around’ and buy the annuity from another provider, or that they could be eligible for a higher enhanced annuity rate if they suffered from serious health issues.

Upon conclusion of the investigation, the FCA fined Prudential almost £24 million for this failure and instructed the company to recompense those affected. Prudential set aside around £250 million ready to compensate the clients that lost out, which were expected to be in the tens of thousands.

It has also been reported by some that Prudential SIPPs may have been systematically mis-sold, and so experts are advising clients to double check their Prudential pension products to ascertain if they were given the correct advice to proceed.