What happened in 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:
- Advice was suitable in fewer than 50% of DB to DC cases.
- Despite guidance that financial advisers should start from the position that a transfer was unlikely to be suitable, 69% recommended the transfer. *
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.
SIPPs, QROPS and other personal pension mis-selling
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).
Was your pension mis-sold?
If you transferred your DB pension into another pension scheme, you could be owed compensation. Typical signs of pension mis-selling include where:
- You transferred a DB pension into a SIPP, SSAS, QROPS or another personal pension (as most people would have been better off keeping their money in their DB pension scheme).
- You were targeted by an unregulated salesperson (possibly via a cold call).
- You felt pressurised to transfer your pension.
- You were advised to move a DB pension to a private scheme, and the provider or adviser later went out of business.
- The negligence of your financial advisor has (or could have) made you worse off in life.
- You were not told about the risks of transferring your pension (or these were not fully explained).
- Your attitude towards risk was not assessed or considered.
What can you do if your DB pension was mis-sold?
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.
*Between April 2015 and September 2018, (DB pension transfers: market wide data results, FCA, July 2019