We answer the FAQs commonly asked about mis-sold pension claims…
The amount of pension compensation you receive depends on when your claim was made and also if your Financial Advice firm is still trading. Nearly all claims are settled by the Financial Ombudsman Service or The Financial Services Compensation Scheme, there are different compensation limits these two bodies can make.
The FOS processes claims when the firm is still trading whereas the FSCS make judgments on claims where the firm is no longer in business.
Up to £ 375,000 for complaints referred to The FOS on or after 1 April 2022 about acts or omissions by firms on or after 1 April 2019.
Up to £355,000 for complaints referred to The FOS between 1 April 2020 and 31 March 2022 about acts or omissions by firms on or after 1 April 2019
Up to £350,000 if the complaint was referred to the FOS between 1 April 2019 and 31 March 2020 about acts or omissions by firms on or after 1 April 2019
Up to £170,000 for complaints referred on or after 1 April 2022 about acts or omissions by firms before 1 April 2019.
Up to £160,000 for complaints about acts or omissions by firms before 1 April 2019, and which are referred to The Financial Ombudsman Service after that date
Up to £150,000 for any complaints referred to the FOS before 1 April 2019
Up to £85,000 if the firm failed after 1 April 2019
Up to £50,000 if the firm failed before 1 April 2019
You can claim pension compensation if you were mis-sold to, but losing pension funds is not reason enough to expect a pay-out. When claiming pension compensation, you are able to use a claims management firm, law firm or make an application yourself.
Being able to claim pension compensation depends on many factors, among the most common are:
1. If charges and fees were unclear
2. If you were not told about the likely risks or how your money would be invested
3. You were not an experienced investor
4. You were encouraged to transfer from a Final Salary Scheme
One of the most common grounds for making a claim is when the consumer was not aware of the charges and fees, they were expected to pay for administrating the pension fund.
Fees charged for pension investments need to be clear, obvious and understood by the consumer – rather than buried away in small print or applied after setting up the pension.
According to the Financial Ombudsman Service between 2 and 4 per cent of all claims include a complaint about charges and fees. Even though this is a relatively small proportion of complaints, it still shows that a significant number of people are unaware of payments they must make to run a private pension.
Financial Advisers often promise high returns as a carrot to dangle in front of consumers. In reality, these high returns are weighted against high risk and unregulated investments such as Overseas Property Developments, Storage Pods and Green Energy Schemes.
If such investments pay off, great, but they rarely do. For thousands of people, they have failed spectacularly. In such cases, there is always one question that needs asking: ‘Was the consumer aware of the investment risks at the start?’ If the answer is ‘no’ there are strong grounds for a claim for compensation.
The Financial Conduct Authority considers sophisticated investors as those with ‘many years’ experience and exposure to a wide range of investments.
High risk and unregulated investments are usually unsuitable to consumers who have transferred out of a Final Salary Pension, straight into a SIPP.
In these instances, an argument can be made that the consumer was not an experienced investor and is due compensation for losses to their pension fund.
Did your Financial Adviser suggest transferring from your Final Salary Pension to an alternative such as a Self-Invested Personal Pension?
Successive governments as well as The Financial Conduct Authority have continuously stated the overwhelming majority of consumers are better off with a Final Salary Pension scheme rather than a Personal Pension such as a SIPP or cash in the bank.
This is because a Final Salary scheme gives a fixed retirement income, without many risks. If your Financial Adviser advised you transfer out of a Final Salary scheme, also known as a Defined Benefit scheme you may be entitled to compensation for losses to your pension fund.
The most recent data shows 653 new complaints in the last three months to the Financial Ombudsman Service. In this three-month period a further 403 complaints were made for other personal pension products including Final Salary (Defined Benefit) Transfers.
More than three thousand complaints regarding SIPPs were made to the Financial Ombudsman Service in 2018, they are the most complained about pension product against Financial Advisers. Last year’s figures are due for release soon.
From April 2019 to March 2020, the FSCS processed approximately 2,500* claims for mis-sold pensions, paying out £282m. This was against 549 different firms.
The FSCS Annual Report 2019/20 published in July, quotes CEO Caroline Rainbird as referring to “an ever-growing number of claims against Self-Invested Personal Pension (SIPP) operators, which continues the rising trend of pensions-related claims”.
Records are not kept by either The Financial Ombudsman Service or The Financial Services Compensation Scheme for average pay outs. To get a good idea how much compensation you would be awarded it is advisable to work out how much you have lost in your pension fund. If your claim is successful it is likely you will be awarded an amount close to this.
In a report published last summer the Financial Conduct Authority said an ‘unacceptably high’ proportion of consumers in Final Salary (Defined Benefit schemes) had been advised to transfer out of their pension scheme.
The FCA’s report of December 2018 stated that in less than 50 per cent of all Final Salary (Defined Benefit) pension transfers, advice given was not in the best interests of the consumer.
Figures for bad advice for general Personal Pensions are not collected by The Financial Conduct Authority.
Finance experts believe only a small proportion of consumers who have been mis-sold to have made claims but it is likely the total number is in the hundreds of thousands. In many cases, mis-sold pensions have led to either a ‘significant’ or ‘complete loss’ of an individual’s pension funds say the Financial Conduct Authority.
You should first make an official complaint your adviser. They have eight weeks to respond. It is best to do this via email and/or recorded delivery letter.
After this period, you have six months to take the complaint to the Financial Ombudsman Service. If the advice firm has gone out of business, you can submit a claim to the Financial Services Compensation Scheme.
You are not required to use our services to pursue your claim. You can also seek further advice or shop around subject to any time limits within which a claim must be made.
It is possible for you to present the claim for free, either to the firm or person against whom you wish to complain or to the statutory ombudsman (Financial Ombudsman Service or Pension Ombudsman Service) or the Financial Services Compensation Scheme, whichever is applicable to your claim.