Mis-sold pensions: the tell-tale signs

If you have ever moved your retirement provision into a Self-Invested Personal Pension (SIPP), doing so on the advice of a financial adviser, there’s a strong possibility that you are a victim of mis-selling.

Unfortunately, SIPP mis-selling is rife and far too many investors have been affected. That could mean they have lost large sums of their hard-earned money by switching their workplace pension to a SIPP.

That isn’t to say that SIPPs are all negative. Far from it. Over time, these perfectly legitimate ‘DIY pension pots’ which allow investors to put their money in multiple, varied products have been massively popular and more than a million people have invested in them, largely due to the many benefits they offer.

The SIPP plus points, when compared to a standard workplace pension, include greater flexibility in investment opportunities available, a number of tax incentives, the ability to self-manage your pension and the option to get the help of a financial adviser to invest on your behalf.

The bottom line, though, is that they can provide better returns on your investment.

JAR FOR THE COURSE: You worked hard to ensure you had provision for your retirement. If that has been reduced or lost through bad advice we can help

The investment comes with risk, though. Your workplace pension may not be especially exciting but it doesn’t usually make great sense to transfer from your workplace pension while it is still accumulating. It does, however, give you security as well as employer contributions and other guaranteed pension benefits. Investing in a separate pension isn’t for everyone, and it’s important to remember that investments promising high returns may be subject to a higher risk of potential losses.

And, in addition to simple bad advice being given, unscrupulous salespeople can promise the earth as they prey on their customers’ eagerness to maximise their pension fund. The Financial Conduct Authority (FCA) reports ‘serious and ongoing failings’ by financial advisers with regard to SIPP investing.

Cases of customers suffering financially due to badly-invested SIPP money or under-performing schemes have been rising rapidly – so much so that the Financial Services Compensation Scheme (FSCS) has set aside a £120million compensation scheme for victims of SIPP mis-selling.

TRANSPARENCY: Is your adviser being honest and telling you everything you need to know?

So, with that in mind, how can you know whether you have been mis-sold a pension product? Are you worse off as a result of a SIPP that you bought? Are you eligible to make a claim for compensation? It’s thought that one in eight savers may have been mis-sold a pension.

If you are among them, it’s time you took action to reclaim your money – Barings Law can do just that, with a team of legal experts dedicated to helping victims of mis-selling. That could be because it involved high-risk investments or merely because your financial adviser neglected to mention the fees and commissions they have charged for arranging your purchase.

Here are the 10 tell-tale signs that you may have been mis-sold your pension investments:

1. Cold calling

This is probably the biggest warning sign with regard to pension planning. Not all cold calls lead to people being mis-sold their pension but unregulated marketing firms have proved to be a significant factor in potential investors being left out of pocket.

The practice has now been outlawed but before the ban in 2019 a staggering number of people were targeted by untrustworthy individuals and organisations. Being offered a free pension review on the basis of a cold call could be a clear warning sign. In our experience, complete strangers doing such work out of the goodness of their hearts is a rarity.

2. Pressurising customers

Pushy brokers who coerced you into a financing scheme may not be entirely impartial. And many who are fraudulently flogging SIPPs are skilled in the art of high-pressure selling. With a professional and polished sales pitch they promise huge returns to tempt their customer in, before throwing in the time-sensitive nature of the scheme they are selling.

Offers that are limited by time (or the number of investment opportunities available) are common features of mis-sold SIPPs, relying on the customer to sign up on the spot for fear of missing out. Our advice would be not to sign up to such schemes without undertaking due diligence, and a second opinion on a scheme’s legitimacy wouldn’t go amiss.

If your adviser is pushing hard for a certain scheme, one that may not be your best option, consider why that is – do they have your interests or their own at heart? If your financial adviser did not tell you about the full range of options available then you may have a case for making a claim.

RISKY BUSINESS: Some financial advisers will pressurise clients into signing up for investments that are not suited to their needs

3. Selling SIPP investments as a good deal for everyone

In a highly-complex market such as pension investment schemes, one solution that suits every customer simply doesn’t exist. The reality is that only customers with certain requirements and circumstances will be suitable for each investment opportunity. Selling SIPPs as a deal that is right for everyone could be fraudulent activity on the part of the financial adviser and could also be grounds for customers who have lost money as a result to make a claim for compensation.

4. Inexperienced sellers

YOUTHFUL ADVICE: Financial experts who exaggerate their knowledge and experience may be mis-selling SIPPs to their customers

Your broker or financial adviser may claim to have a wealth of experience when it comes to hunting out investment opportunities, pension plans and high-performing financial products. But do they?

If they were, let’s say, economical with the truth about how vastly knowledgeable they are or aren’t, then they may not have been the best-placed person to dig out the best deal for your money. This is a clear case of misinformation and could be grounds for a compensation claim to be made.

5. Hidden charges or fees, and undisclosed commission

If you didn’t know about the fees your financial adviser earned for their services, you are likely to be owed compensation. The primary role of any financial adviser or broker is to give their client complete, accurate and relevant information that allows them to make the decision that best suits them. Selling a client the pension plan based primarily or solely on what commission it would earn them is a clear instance of mis-selling. If this has happened to you then you should seek legal advice.

6. Signing up to unregulated investments

The investment schemes you look to put your savings in could be new and totally unregulated by the FCA, meaning you are unknowingly putting your capital at a far greater risk than you’re comfortable with. And if they were led to believe that they were buying into a secure investment opportunity that guaranteed returns when, in fact, it was an Unregulated Collective Investment Scheme they could have a case for compensation.

DON'T WING IT: Make sure your nest egg is protected

7. Transferring from a work-based pension

Very few instances exist in which transferring your pension from an existing workplace scheme will be beneficial for you. If you were advised to do that and miss out on the guaranteed savings and benefits associated with a workplace pension then it’s highly likely it has been a case of mis-selling.

8. Tax implications

If you were not given all the information you needed about your tax liabilities and thresholds, or if you were told you could avoid paying tax, you may be eligible to claim compensation. Transferring your pension money into tax-avoidance schemes is an illegal practice and your adviser should know this.

9. Non-transparency on the risks involved

Switching to a SIPP is, in itself, a risk but if a customer does not have the extent of the risk explained to them they may have been misled. Investing in normal stocks and shares on the London Stock Exchange is considered relatively safe, albeit with a lower yield, but while there are more lucrative investment opportunities out there, you need to be made aware of the risks involved.

The full risks of switching your pension to a SIPP should be fully disclosed and transparent when you discuss it with your adviser.

10. Over-promising and under-delivering

The overwhelming majority of ways in which consumers have been talked into moving their standard pensions to a SIPP is that the investments they were advised to pour their savings into – hotels and holiday homes, green energy or ethical forestry schemes are just a few examples – simply haven’t performed as the customer was promised they would. If the promised rate of return seems too good to be true, it usually is.

In virtually every case the pension holder has lost some – or, devastatingly, all – of their money.

FULL RECOVERY: If you have been mis-sold your pension it's time you took action to reclaim your money

One of the main issues facing customers with mis-sold pensions is that, in reality, none of us keep a close enough track of investments and what they mean for our SIPP pots. It’s highly likely that the first you’ll know about a scheme that has run into issues is when your SIPP provider gets in touch to let you know the bad news. In the worst-case scenario, financial advisers have not carried out their due diligence into the risks and recommending schemes that have seen their customers’ savings wiped out.

Your financial adviser has a duty of care to you when recommending investment schemes for your SIPP. A failure to adequately protect your savings can be a clear case of mis-selling.

If you think you have been mis-sold a pension or received bad investment with the result being a cost to you financially, you may be entitled to compensation.

If any of the above warning signs ring a bell with you then it’s time to take action to recover your losses. Our team of specialists can assess the advice and recommendations you were given and prepare a claim that maximises the compensation you can receive.

We work on a no-win no-fee basis so you don’t have to pay a penny until you win your case.

Call us on 0161 200 9960 to speak to one of our advisers without obligation. We’re ready to get you the money you have lost due to bad financial advice.

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