Tens of millions of us have money tied up in a pension product of one sort or another and we all hope our hard-earned savings will still be there when we need it, to help fund our retirement.
Most financial products (including pensions) are recommended by trustworthy, qualified and experienced advisers who are willing to fully explain a product to their client, paying particular attention to risk factors and its suitability to each individual person.
However, sadly, this is not the case for everyone.
As reported in the media, the Financial Services industry has been rocked by a number of high-profile and costly mis-selling scandals over the last decade or so, involving organisations such as banks, insurance providers, credit card companies, loan companies and even pension providers.
Here we aim to provide comprehensive information regarding what may constitute a mis-sold pension plan, the types of pension plans involved, how to claim for a mis-sold pension, and where to go to from here if this applies to you.
What Is A Pension Plan?
Simply put, a pension plan is a tax-efficient savings vehicle which you can contribute to during your working years, to provide you with additional funds when you retire.
Pension products come in various forms, the most common being personal pension plans for the employed or self-employed, or employees joining some sort of company pension scheme.
The tax benefits relate to (a) getting tax relief on the contributions (meaning more money is invested into your plan), (b) the tax-free growth on the investments and (c) a tax-free lump sum, which is available on most products when you decide to draw your pension.
However, there are many caveats, rules and different types of pension products available out there. And the rules can change, affecting everything from when you can take your pension, how much lump sum you can take and options that may be available at retirement.
Therefore, it is recommended to discuss any new policy, amendments, and the choices at retirement with a qualified and experienced financial adviser. Having the wrong product can be very costly!
It is important to note this article does not apply to the Basic State Pension paid by the Government, it relates to individual or company pension plans that you and/or your employer contribute to.
How Do I Know If I Have Been Mis-sold A Pension?
Simply having a pension pot that has reduced in value, does not necessarily mean it was mis-sold to you.
Pension clients should be advised that the value of their investments within a pension plan can go down as well as up and be informed of the risks attached to their fund selection. So, the critical issue is whether or not your broker actually explained that to you, amongst other things, when you commenced the policy.
Some of the most common examples of pension mis-selling include the following :
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?
Hard Sales / Pressure Selling Tactics
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?
Lack Of Due Diligence
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.
Told It Is Guaranteed / 100% Safe
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.
Not Informed Of Fees / Commission
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.
Poor / Bad Advice
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.
If any of the above scenarios sound familiar, then you may be eligible to make a claim for financial mis-selling.
If you wish, you can contact an experienced claims advisor here, to double check if you have a valid claim and help you through the claims process. Knowledge and experience of handling claims can make all the difference in putting together a strong case and achieving the best settlement.
What Types Of Pensions Were Mis-sold?
When a financial adviser or broker recommends a specific type of pension product, it should be suitable for the individual client they are selling the product to, following a full review.
However, hundreds of thousands of people in the UK have been sold pensions that are wholly unsuitable for them, and many have lost significant amounts of savings because of it, effectively destroying their future retirement plans.
It is a genuine concern for the financial industry and within the pensions arena. And billions of pounds have been set aside by many organisations, in order to settle claims for mis-sold pensions.
The FCA alerted advisers, brokers, pension providers and investment fund managers that they could be held responsible for mis-selling pensions products, if they failed to adhere to the rules and the code of ‘best practice’, or avoided being transparent on the level of risk to their client’s money.
Many different types of pensions are caught up in this mis-selling scandal and include the following:
1) Mis-sold SSAS Pensions
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.
2) Mis-sold SIPPs
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.
3) Mis-sold ‘Contracting-Out’ Of SERPS
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.
3) Mis-sold Pension Annuities
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.
5) Mis-sold Final Salary Pension (DB Transfer)
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.
6) Mis-sold Pension 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.
If any of the above sounds familiar and you wish to pursue a compensation claim, or just want to discuss your case in more detail, feel free to complete the online form here and get the ball rolling.
Pensions Mis-selling In The 1980s And 1990s, Can You Still Claim?
It is still possible to make a claim for a mis-sold pension that you started many years ago, and even decades ago, in certain circumstances.
In fact, one of the three strict criteria for claiming compensation for mis-sold SERPS, is that a client must have ‘contracted-out’ between 1st July 1988 and 5th April 1997, based on the advice given.
If you are concerned about pension mis-selling, but are worried your case relates to advice given many years ago, reach out and complete the online enquiry form. An experienced claims advisor will be happy to check the dates and details for you, to validate if you can still file a compensation claim.
Do You Think You Were Mis-sold A Pension By One Of The Following Companies?
Many different pension providers and financial organisations in the UK have been caught up in the scandal of mis-sold pension products, including some pretty big names in the pensions arena.
Sadly, it only takes one or two ‘bad apples’ within their group of financial advisers to be found guilty of financial mis-selling to taint a company’s reputation and bring the advice of all their agents into question.
But sometimes it is the company’s own sales practices that come under scrutiny, shining an unwanted spotlight on some of the best-known pension and annuity providers.
Standard Life Mis-sold Pension
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.
Mis-sold Pensions By Aviva
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.
Royal London Mis-sold Pensions
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.
Mis-Sold Prudential Pensions
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.
Compensation For Mis-sold Pensions
It must be said that the above examples are only a tiny selection of the financial institutions and pension providers that have fallen foul of the rules put in place to protect clients.
The fact is that billions of pounds have been set aside by pension companies, large and small, to pay compensation to customers who have been mis-sold a pension product.
Do you have a pension or annuity sold by any of the above companies?
Having read the examples, do you think you may have been mis-sold your pension, SIPP, transfer or annuity?
If you do and would like to know more, we recommend using our on-line form, to allow an experienced claims advisor to contact you and discuss your case further.
What Is The Time Limit For A Mis-Sold Pension?
There is not a clearly defined time limit, as such, to be able to claim for a mis-sold pension.
It all depends on each individual case and the type of pension you are claiming compensation for.
For example, compensation claims for mis-sold SERPS can only be considered if the advice received led you to opt-out between 1st July 1988 and 5th April 1997, which is decades ago!
Whereas in the example of mis-sold annuities by Prudential, the fine from the FCA related to annuities sold between July 2008 and September 2017, and it is quite possible that some annuities started before or after these dates may also have been mis-sold.
Whether your pension, pension transfer, SIPP or pension annuity started recently or many years ago, the eligibility to claim largely depends on the mis-sold criteria explained in the earlier sections.
Don’t be put off from making an enquiry, just because your pension was started many years ago.
Completing our form will enable an experienced claims advisor to contact you, to discuss your specific case and let you know if you may have a valid claim. A quick, free, no-obligation chat could be the difference between being stuck with a wholly unsuitable policy that could result in losing thousands of pounds in retirement, or claiming the financial compensation you are entitled to.
We are not suggesting that every single enquiry will result in a compensation claim, but billions of pounds in compensation has already been paid out for mis-sold pension products. And hundreds of thousands more customers are thought to have a valid claim for compensation waiting to be made.
Questions & Answers
What Is The Average Compensation For A Mis-Sold Pension?
It is difficult to say how much an individual is likely to receive in compensation for a mis-sold pension. Some reports suggest that the average is somewhere between £25,000-£50,000, but in reality settlement figures could be more or less than this average, dependant entirely on the circumstances and losses suffered by each individual client due to the mis-selling.
Whether the compensation paid out is considered low or high, you are entitled to claim if you have a valid case, and it could make a huge difference to your future retirement plans.
Experienced claims personnel will work on your behalf to secure the highest settlement possible for your individual case and can significantly reduce the amount of time you spend on it, compared to doing and managing it yourself.
Can I Claim For A Mis-Sold Pension?
Yes, you can, as long as your situation meets at least one of the pension mis-selling criteria.
There are many examples of what may constitute financial mis-selling, including:
- having been pressured into starting the policy, or subjected to hard sales tactics
- a failure of the adviser to fully explain the pros and cons of a product
- a lack of due diligence on the part of the adviser to fully consider your financial situation or attitude to risk
- being advised to move monies away from an employer’s final salary scheme into a personal pension, without adequate explanation of the benefits you are losing in doing so
- starting or moving to a SIPP (or SSAS) and investing in high-risk non regulated investments without full disclosure of the dangers to your fund value should things go wrong
- a failure to disclose the fees or commission the advisor or agent received for selling the product
- not being informed that you can buy a pension annuity from another provider, which may have given you a higher regular pension income
- not being offered an enhanced annuity rate, if suffering from a serious health condition or having a lifestyle choice that may reduce your expected lifespan, such as being a long term heavy smoker
- having been told to contract-out of SERPS at a time and age when it was not recommended to do so (specific criteria for SERPS claims is set out in the above guide)
- being sold a single life annuity, when your personal circumstances meant a joint life annuity should have been discussed and recommended instead
As you can see, there are many different circumstances under which pension mis-selling may have occurred, and the above is not an exhaustive list!
An experienced advisor can quickly and easily determine if you could have a valid case, so complete our form today and get some free, no-obligation advice.
How Do I Know If I Was Mis-Sold A Pension?
It can be difficult sometimes to know if you were mis-sold a pension, or whether a pension fund or product has simply performed less well than you had hoped.
There are many clear examples of pension mis-selling tactics and failures, as detailed in the article above, but if something ‘didn’t feel right’ when you took out the pension or annuity, it may be worth checking further. Making a valid claim, if successful, can recompense you for losses sustained and make a huge difference to your retirement finances.
How Long Does A Mis-Sold Pension Claim Take?
Again, there is no ‘one-size-fits-all’ answer to how long a claim will take.
The timescale will depend on the strength of the proof you have that the mis-selling occurred, the company involved, whether they dispute your claim and how quickly a negotiation can take place to settle on a compensation amount.
Many well-known firms have already settled thousands of claims and so it could take several months to a year, or perhaps longer, it all depends on the individual circumstances. Whatever the timeframe, if you have been mis-sold a pension product, you have the right to seek compensation.
How Can I Make A Mis-Sold Pension Claim?
As with most types of claims, if you have the time and confidence to manage a claim yourself, you can do so. You would need to collate all your proof and make contact with the company directly, setting out the circumstances you believe constitute financial mis-selling.
However, if you do decide to do it yourself and are unhappy with the result, the Financial Ombudsman service may be able to help you.
Of course, the other option is to make contact with experienced claims advisors who can do much of the time-consuming admin and leg-work on your behalf, and know how to put together a strong case for compensation.
If you choose to complete our enquiry form, your case will usually be processed on a no-win-no-fee basis, meaning no initial outlay or bills to pay during the case. And, if your claim is successful, the legal fees etc will be deducted from the final settlement figure at the end of the process, so you only pay if you win!
Do I Pay Tax On Mis-Sold Pension Compensation?
This is a tricky one, as it will depend what type of compensation you have received, your personal tax status and where you are in the retirement process.
A specialist tax adviser or solicitor should be able to confirm the details for your specific circumstances, but we believe a general guide would be as follows.
If you are receiving compensation for investment loss and the compensation will be paid directly into a pension fund, then there may not be an additional tax liability.
However, if your compensation is for a mis-sold annuity, and you will be receiving a higher pension income as a result (for example if it is decided you should receive an ‘enhanced’ annuity rate for poor health etc) then it would form part of your income and be taxed as such.