Concerned about pension transfer advice?

How to spot poor advice and what to do about it

The financial services sector regulator, the FCA, has long been concerned about the potential detriment to consumers caused by transferring their pensions from Defined Benefit (final salary) pensions provided by their employers, to personal pensions. In a final salary pension scheme, the employer carries the risk of ensuring that the investments in the pension pot grow sufficiently to pay the worker an income when he has retired.  In a personal pension (whether invested via a self-invested personal pension (SIPP) or a money purchase scheme), the worker carries that risk and, if the investment does not grow sufficiently, then he will have a smaller pot to fund his retirement.

This has been recently highlighted in the press where many British Steel worker’s pensions were transferred into self-invested personal pensions and, from there, into potentially inappropriate investments. Philippa Hann and a team of specialist financial services litigators from Clarke Willmott act for a number of these workers and would be delighted to speak to any others who are concerned that they may have been mis-sold a transfer of their TATA or British Steel Pension.

How to spot poor pensions transfer advice

Not all pension transfers are negligent and therein lies the problem. As a lay person without detailed knowledge about pensions and investments, it is impossible to tell what is good advice and what is bad.

Here are some things to look out for:

Who promoted the transfer?

Is the decision to transfer your pension something driven by you or were you cold called or did you see an advert for a pension review? Pension transfers can be lucrative business and some unscrupulous companies have been contacting people with a view to persuading them to unlock their pension money. The regulator has issued guidance warning that “Pension review scams contact people unexpectedly, offering a free pension review. Investors are often called out of the blue, but contact can also come by email, post, word of mouth or at a seminar or exhibition.  As they’re promoted as long-term pension investments, it could be several years before you realise something is wrong. Most decent financial advisers would not deliberately court this type of work.

Have you met your adviser face to face?

Transferring money from a final salary pension is a big financial decision. It is usually irreversible and can cause extreme hardship in a person’s old age.  It is hard to imagine a financial adviser agreeing to do it without wanting to meet you personally to discuss the complex nature of the decision and your personal views, circumstances, needs, objectives and fears.

Are you also being advised where your money will be invested after it is transferred and why?

Again the FCA has released guidance warning advisers that it expects all advisers to consider the assets in which the client’s funds will be invested. It is not sufficient for an adviser to simply advise you to transfer into a SIPP, for example, advisers must provide advice on where the pension money will be invested within the SIPP and the likely returns.  An adviser should not use generic assumptions for hypothetical investments.

Are concerns over not transferring being put into your mouth?

Yes, we will all be concerned about leaving the benefit of the pension to our loved ones. We might also be concerned about the financial ability of the employer to pay our pension until our death and, of course, most of us are keen to retire sooner rather than later, but at what cost?

These are not necessarily good reasons to transfer out of a final salary pension. The discussions with your adviser over these concerns should include how life assurance could provide a death benefit to your family, the role of the Pension Protection Fund and the long term cost of early retirement.

Is your adviser only going to get paid if you agree to transfer?

Whilst this is not a sure sign that things are not right, and many people could not afford the advice without contingent charging, your adviser ought to be discussing this with you in detail and explaining the conflict of interest inherent in this method of charging.

Are all pension transfers bad?

We are not saying is that all transfers are bad, there are some very good reasons to transfer out of a final salary pension. But if any of the elements outlined above ring true for you, or you simply have the feeling that it was not the right decision, you only have 6 years from the date of the transfer to take action. As with most things, the sooner you take steps to investigate, the better.

How to seek compensation for poor pension transfer advice?

1. Request a copy of your file from your adviser;
2. Ask for a breakdown of fees paid and to be paid in respect of the transfer and investment of your pension money;
3. Don’t delay in seeking professional advice.

If you have concerns about pension transfer advice you have received, get in touch. We can represent individuals or groups of employees affected by issue.

Contact a specialist financial services solicitor

For further information and guidance, please contact a member of our specialist team. Our team have recently been featured in a number of publications, including Professional Adviser and New Model Adviser, following their instruction by a group of steelworks seeking to reclaim their pensions after the liquidation of Active Wealth.