Compensation claims for mis-sold pensions have reached an all-time high, with the number of payouts in the UK doubling between 2016 and 2018. The Financial Services Compensation Scheme (FSCS) have been investigating this increase and found pension transfer compensation rose to £40 million in 2018. This revelation has caused serious concern in the investment sector and it's hoped that the FSCS's investigation will lead to a stricter code of conduct for financial advisers.
Thousands of customers affected
Pension mis-selling payouts have been a huge issue in recent years. In 2016, £20 million in compensation was awarded to UK customers, followed by £37.5 million in 2018 and £40 million in 2019. Research by the FSCS has shown a direct correlation between these numbers and an increase in pension transfer activity, which rose from £3.4 billion in 2014 to £37 billion in 2017.
A major cause of mis-sold pensions is clients receiving low-quality advice from financial advisers. The FSCS has stated that "vulnerable" customers are being "persuaded" to transfer their pensions to risky investments that benefit the seller more than the client. In many cases of mis-selling, the pension schemes have high commission rates for the sellers. While investigating pension transfers, the Financial Conduct Authority (FCA) has found that less than 50% of the advice it reviewed was suitable for the customer. This sub-standard advice was given to tens of thousands of customers, many of whom may not know about compensation opportunities.
These investigations are showing financial advisers that they must adhere to all relevant regulations. Since 2015, 19 firms have ended their pension transfer advice services because FCA investigations found that their advice was unsuitable. The FSCS has made consumer compensation a top priority and are working to reach consumers who are currently unaware that their pensions were mis-sold.
Have you been mis-sold a pension?
Mis-sold pensions affect millions of UK customers, and you might not realise that you're one of them. If you feel like your adviser provided incomplete or unclear information or pressured you to transfer your pension to a specific scheme, your pension may have been mis-sold.
Many people who have been mis-sold pensions found that their financial adviser used technical terms they didn't understand, confusing them and preventing them from fully understanding the situation. This technical jargon can also make it difficult to look back through your pension documentation and understand if everything was done correctly. If you're struggling to see if your pension was mis-sold then seek expert advice at the earliest opportunity.