This is one of the most commonly asked questions by people who believe they have been mis-sold an investment: can I get compensation?
Pension holders in particular are interested in this question. Specifically, pension holders who transferred their pension into a SIPP – a Self-Invested Personal Pension.
This is because many SIPP holders in the UK have invested in schemes and opportunities that are regarded as high-risk. They were sold these products by companies or individual financial advisors who may have been engaged in mis-selling. If mis-selling has occurred, you might be able to get compensation.
The sums of money involved can be vast. After all, it's not unusual for a SIPP holder to invest all or most of their investment in a high-risk scheme, only to find they have lost everything.
The Problem with High-Risk Investments
Financial advisors, as well as companies offering financial advice, must work under strict regulations set out by the Financial Conduct Authority (FCA). Those regulations include ensuring the investment products they sell are suitable for the individual.
While every case is different, high-risk investments are generally not suitable for retail investors such as individuals investing their SIPP. Instead, high-risk investments should only be sold to investors with experience and high net worth.
The Problem with Some Financial Advisors and Companies
If everyone played by the rules, mis-selling would not occur. Too often, however, financial advisors and companies can receive very high commissions for selling high-risk products. This leads to them offering risky investment products to people they shouldn't be selling them to.
The financial advisor or the company gets the commission while the investor ends up with an unsuitable product at best and a complete loss of their savings at worse. This is mis-selling.
Examples of Mis-Selling that Can Result in You Getting Compensation to Recover Your Losses
- You are offered an investment product that you don't fully understand
- You are offered an investment product that doesn't suit your circumstances
- The financial advisor doesn't properly explain the risks involved
- You are convinced to invest most or all of your savings in one thing
Is There a Time Limit on Claiming Compensation?
Time limits often cause confusion for people who believe they may have been mis-sold an investment product. This is because there are rules that say you should make a complaint within six years of when the mis-selling took place, or within three years of you starting to suspect something was wrong.
However, you might be eligible for compensation regardless of how long ago the mis-selling took place. This is because the rules for compensation eligibility are based on a range of different factors. When you were sold the investment is only one of those factors, and it is not necessarily a barrier.
Can You Get Compensation?
The summary is, if you have been mis-sold an investment product, you may be able to claim compensation. Your best approach is to get advice to find out more if your situation could be regarded as mis-selling and the steps you can take to get your money back.