Have you mis-sold your pension? It can be hard to tell, particularly if your financial advisor has obviously not done anything wrong. However, if you don’t have the income that your current private pension offers you from your old pension, you may have cause for complaint.
Mis-selling pensions are a common problem in the UK, and they can have dire consequences, particularly for older people. The Financial Ombudsman Service takes mis-sold pension claims very seriously, but you might not be sure if you can claim them.
In recent years, the FCA has been working to completely shut down unregulated pension plans for consumer protection. Below we will discuss the most common types of pensions to be mis-sold.
The Uk’s Most Common Mis-Sold Pensions
The Financial Conduct Authority (FCA) usually regulates the sale of mainstream investments, shares, funds, and stocks that you may typically select to invest through SIPP. However, there is a whole host of unregulated investments that most investors have been influenced in making with their pension funds.
Most of these schemes are commonly referred to as Unregulated Collective Investments Schemes. In this, the host of individual investors pool their cash for a fund manager, which is then used to invest in several forms of assets that the FCA does not regulate. The following are some of the commonly mis-sold pensions.
Final Salary Pension
This pension scheme is handled by the employer where the worker’s final salary is taken into account for his or her retirement and delivers an amount that is equal to his or her known standard pay. Because of its volatile nature, it is not advised to transfer the final salary pension to any other pension provider or product.
The final salary pension is very popular retirement pension plan as it offers you a guaranteed income that will significantly increase your salary. Despite the absolute advantage of a guaranteed income for life, most final salary pensions are transferred out into an environment, putting clients in a position where they can potentially incur a lot of losses and run the risks of their final salary pensions running out before they die. You can claim pension closure compensation.
Self-Invested Personal Pensions (SIPPS)
SIPP is the most frequently mis-sold pension type. SIPPS were introduced some decades ago, but for many of this time, they were unregulated.
The SIPPS plans offer customers the ability to choose where to invest their money. SIPP investment is often high risk, highly worthwhile, and intended for experienced investors. They are primarily suited for very high-income people who can afford to lose money.
Although not suitable for normal people, they are often sold to inexperienced investors. Unregulated introducers now get in touch through cold call – now illegal practice. The type of pension was sold as low risk, but this is not the case.
These investments are not suitable for most people. Not only are they risky investments, but they can also be extraordinarily illiquid and speculative. That is, it is not that easy to sell these investments.
The Financial Conduct Authority prohibited the sale of such investment plans to ordinary investors in 2013. To invest in such an investment, he or she needs to demonstrate that he/she is a sophisticated or high-net-worth investor.
The problem is that in the years leading to the ban, people can certify themselves to be worth a high net or obtain a financial consultant to do this for them. Therefore, it is effortless for the SIPP to mis-sell. If you think that you are responsible for SIPP compensation for mis-selling, do not waste any time making your claim.
Occupational Pension Schemes (OPS)
An unregulated entity establishes an occupational pension scheme to prevent regulated advisory procedures. In general, it refers to an account established by a company’s employer to help employees save for retirement. In most cases, the employment pension scheme falls into three categories:
- Defined pension benefits schemes
- Defined pension contribution schemes
- Plans for the cash balance
In most cases, the employer must contribute to the employee’s pension in the occupational pension schemes. The employers’ contribution is deducted from the monthly wage of the employees. There are opportunities for mis-selling an OPS.
Free Standing Additional Voluntary Contribution(FSAVC)
FSAVC Unlike other pension schemes, doesn’t limit the amount of cash that can be paid into their monthly pension fund. FSAVC provides the retirement investors the freedom to decide how much they want to save.
Those looking for pension schemes to make their expenditure more flexible can opt for such a pension plan. There is a chance, however, that you might feel that your FSAVC pension was mis-sold.
Qualifying Recognized Overseas Pension Schemes (QROPS)
These pension types schemes are based outside the country. They are not suitable for the general public and are intended for expatriates or other UK citizens who plan to retire abroad.
There are more than half of these schemes in Australia, Gibraltar, Malta, and the Isle of Man. In many instances, customers do not know that their money was moved abroad. With fewer regulations than British companies, customers will have few options if their investments fail. In this case, the FSCS will not be able to compensate people. It is recommended that companies be chased directly to the courts.
Small Self-Administered Schemes
These types of pension schemes are also commonly mis-sold. Many instances have recently come to light. The SSAS is typically designed for individuals who work with small firms to run their pension plans for employees, established by the directors themselves. However, firms regularly set up such schemes to get around regulated loopholes.
A company, named after its address, or other personal information, such as the year of childbirth, is set up for the client. The customer is listed as the director.
The manager remains responsible for legal documents, such as tax returns, while the company is dormant. The idea is to transfer the responsibility for pension management and investment decision-making in unregulated assets to the particular customer from the initial pension company.
The FCA seeks to end the gaps and ways in which scams and fraudulent schemes work. One of the most effective solutions is awareness-raising and knowledge circulation. It is risky if people switch their pensions from stable schemes to one of the above. Money also ends in inappropriate arrangements with unregulated high risk investments. In certain cases, customers have little to say that their investments are mis-sold until they are too late. Often they are left without life savings.
