SIPP mis-selling, inadequate advice on defined benefit pension transfers, and mis-sold annuity claims are all in the news as companies, regulators, and the FSCS continue their attempts to right the mis-selling wrongs of the past.
The Financial Conduct Authority has published proposals that would apply to financial advisers in an effort to stop pensions mis-selling. The advice aims to give pension holders more protection when getting advice on whether or not to transfer their pension from a defined benefit pension to a pension contribution scheme.
Transferring a defined benefit pension means giving up the guaranteed income that such pensions offer. The FCA wants to make sure anyone making a decision to do this is not mis-sold the new pension.
The Financial Services Compensation Scheme has paid £105 million in SIPP claims during 2016 to 2017. It had forecast compensation claims of £95 million so the ay outs are ahead of expectations. SIPP schemes are self-invested personal pension schemes. They are sold by financial and pension advisors but forecasts for the schemes don't always deliver on the promises made.
Not only was the total pay-out for SIPP compensation claims higher than forecast, the compensation is up significantly on recent years – up 35 percent, in fact.
The cost of paying out claims to people mis-sold pensions is expected to rise by 67 percent. The Financial Services Compensation Scheme made the announcement in its latest budget. The type of claims it expects to rise relate to occupational pension transfers.
Many of the current claims relate to SIPP schemes. As a result, the levy for life and pension intermediaries has been increased to £171 million. Outsourced complaint costs are rising at the FSCS too as a result of the increases in pension claims.
Prudential has set aside £175 million to cover claims by customers mis-sold annuities. It made the announcement in its recent annual results which reported record profits at the firm of £4.3 billion. This is largely due to the company's operations in Asia and the US which saw profits rise to £1.5 billion and £2.1 billion respectively. In the UK, profits are £799 million.
Some of the annuities mis-selling was to ill customers. They were not told their shorter life expectancy meant they could earn more.
The scandal of customers being sold annuities incorrectly rumbles on – Standard Life, the firm most affected by the mis-selling claims, expects to pay £125 million to compensate its customers. Many of them were not properly advised on buying enhanced annuities – enhanced annuities give individuals bigger pensions while they are alive.
Over the eight years in question, Standard Life is thought to have sold about 150,000 annuity policies. As many as 48 percent of these could have involved mis-selling.