The Financial Services Compensation Scheme pay-outs relating to poor DB transfer advice have doubled in two years.
The data, which has been obtained by Nick Smith MP – a known thorn in the side of negligent financial firms – shows that compensation for this particular transfer has grown to £40m in 2018, up from £20m in 2016.
Smith’s constituency, Blaenau Gwent, saw a pension mis-selling crisis hit its residents in 2016 when it emerged financial advisers and unregulated introducers convinced British Steel workers to transfer their pensions out of a defined benefit scheme into illiquid and high charging funds.
The £40m pay-out to those who were wrongly advised comes from the Financial Services Compensation Scheme (FSCS), a deposit insurance and investor compensation scheme. It can compensate clients if a financial firm is unable to. It has often been described as a “lifeboat” fund.
Nick Smith condemned the figures as “shocking”, stating:
Many people – including my constituents – ended up losing thousands of pounds of hard-earned money because of poor advice they were given.
The number of defined benefit transfers has soared since 2015 when the Government produced reforms around pension freedom. These reforms granted savers in defined contribution pensions the right to access their funds, in any way, from the age of 55.
However, savers wishing to convert their pensions were required to seek professional advice if their pension pot was valued at more than £30,000.
The FSCS has stated it will not shy away from acting on negligent advisers who are found to have given unsuitable advice to transfer. The Financial Conduct Authority (FCA) also created an interim report in relation to pension transfers, showing that more than 50 percent of the advice it had reviewed was unsuitable.
The FCA stated:
It is unacceptable that pension transfer advice should persistently remain at such a low level in comparison to investment advice.
We expect firms to take prompt action on our findings and to check that their business and advice processes do not exhibit similar feelings.
The data from the FCA showed that out of 154 transfers from 18 financial firms, only 74 were deemed suitable, just 48 percent. 45 pension transfers were deemed unsuitable and 35 were deemed unclear.
How can Smooth Law Commercial help?
At Smooth Commercial Law, our team of experts have extensive experience in dealing with a whole manner of claims that arise from negligent and/or unsuitable financial advice, including transfers from defined benefit pensions. We are seeing an increase in claims for mis-sold pensions, and have managed to secure compensation for many of our clients.
Should you have a claim for negligent financial advice, we can deal with your case and look to recover compensation for not just your loss of investment but also any adverse tax liabilities that you may now be facing as well.
You can contact our experienced team by calling the number at the top of this page or by emailing info@smooth-commercial-law.co.uk.