The Financial Services Compensation Scheme (FSCS) released figures that indicated a doubled increase in compensation payouts to individuals who have transferred money out of their defined-benefit (DB) pensions. In fact, pension mis-selling claims reached £40 million in 2018, which saw a considerable rise from the £37.5 million in 2017. Pension transfer activity had also skyrocketed from £5.4 billion in 2014 to a staggering £37 billion in 2017.
Such data is somewhat concerning, primarily since they involve mis-sold goods. As they occurred in such a short period, it indicates that large numbers of people have been receiving unsound financial advice to make such transfers.
One possible reason for this spike in pension transfer activity is the poor guidance that is given by an increasing number of financial advisors. As a result, thousands of people have begun to lose their hard-earned money.
The government instituted pension freedom reforms in 2015, which led to an increase of defined benefit transfers since then. Savers now could access their funds any way they want from the age of 55, although DB pension savers didn’t have this same capability. If their savings surpassed the £33,000 minimum, then they are obliged to seek financial advice to convert their pension. In numerous cases, individuals sought advice even when their pension was less than the minimum amount.
As many people do not receive enough clarity or guidance on the options that would work best for them, they receive advice to withdraw massive amounts of money from their benefits without understanding the consequences. The FSCS believes that 30 per cent of pension drawdowns were obtained without the individuals acquiring proper financial advice beforehand. Even those who sought guidance received information that was wrong or unsuitable for their circumstances.
The FSCS also believes that mis-selling isn’t caused only by unregulated financial advisors. Regulated advisors have also been responsible for the rampant misinformation that has caused UK citizens to make expensive mistakes with their DB pensions. The Financial Conduct Authority (FCA) released a report that found less than 50 per cent of the advice that the governing body reviewed to be regarded as suitable or appropriate. Given the substantial figure, it’s no surprise that mis-sold pension claims have skyrocketed.
The number of claims has continued to increase, which led the FSCS to create a new limit of £85,000 in April 2019. Fortunately, if the claim exceeds the amount, the Financial Ombudsman can raise the limit depending on the case. Any complaints that were introduced after 1st April 2019 have an upper limit of £350,000, while complaints before that date are at £160,000.
If you believe that you were mis-sold an investment, you must immediately check if you can reclaim some of it. Fortunately, the government has created a fund to compensate consumers who have been misled. According to the FCA report, as many as one in eight savers believe that they received poor guidance about their finances. They also recommend consumers to make a complaint as soon as they are suspicious of any wrongdoing.
Dealing with mis-sold products is an incredibly unpleasant experience. If your financial advisor fails to adequately apprise you of the risks involved in making a decision, then remember that you are entitled to compensation. Mis-sold claims continue to rise, so it’s best to protect yourself by being vigilant and making a claim once you think something is awry.
Consumer Reclaim specialises in complaints regarding mis-sold goods and services, as we have the expertise and knowledge to ensure you get the compensation you deserve. Our policy is to take no fees until clients receive their due. Get in touch with us today to see what we can do for you!