TPAS - The Pensions Advisory Service

Pension Mis-selling

Between 29 April 1988 and 30 June 1994 many members of the public were advised to take out personal pension plans when they were already members of, or had access to, an occupational salary related pension scheme. Also, many employees who had preserved pensions with the scheme of a former employer were advised to effect a transfer into a personal pension scheme.

The regulator responsible for overseeing the sale of personal pension plans realised that those advised to take out a personal pension plan in these situations may have lost out financially. They therefore ruled that firms must review the sale of personal pension plans during that period. Those policyholders that were found to have been mis-sold, had to be compensated for any financial loss suffered.

Using guidelines laid down by the regulator, the firm, which provided the advice, obtains details of the benefits that would have been accrued in the occupational pension scheme and compares them to the potential benefits payable from the personal pension plan, on the assumption that the member paid the same level of contributions as they would have to the occupational scheme. If it shows that the policyholder has lost out by joining the personal pension plan, the firm must make good the financial loss.

This may mean reinstating the policyholder into the occupational pension scheme. If the trustees of the scheme refuse to accept reinstatement, the policyholder must be credited with a one-off contribution into the personal pension plan. Alternatively, a few insurance companies gave a guarantee to review matters when the policy holder reached retirement and, at that time, make good any financial loss that has been suffered.

The review itself began at the end of 1994 and still on-going and it is hoped that this will be completed by 2005/2006. However, firms are only carrying out reviews on those policyholders who requested a review on or before 31 March 2000. If you believe you have been mis-sold a pension and would like your case reviewed, but you have missed this deadline, you should contact the firm who gave you the advice and ask for a review. They may be able to review your case under 'special pensions review procedures'.

Some firms have gone out of business since the review began, therefore preventing some policyholders from having their cases reviewed. The current regulator, the Financial Services Authority (FSA) has set up their own team to deal with these cases. If you have not had your case reviewed because your firm has gone out of business, you should contact the FSA Pensions Unit on 020 7712 8990 for advice on how to proceed. If a claim for financial loss has to be made, there is a body, the Financial Services Compensation Scheme, which can make awards. However, such awards have a maximum amount that can be paid, currently £48,000.

Q & As

Are all personal pensions eligible for review?

No – only personal pensions sold between 29 April 1988 and 30 June 1994.

It only covers the following:

• transfers – where you took a transfer from an occupational pension scheme to a private pension scheme, and
• opt out or non joiners – where you took out a personal pension instead of staying in or joining an occupational pension scheme which you were eligible to join.

I believe I may have been wrongly advised to leave my company pension scheme. Can you help?

If you believe you may have been incorrectly advised to leave your company pension scheme to start a personal pension scheme, you should initially complain in writing to the Compliance Officer of the company who gave you this advice. This may not be the same as the company which operates your personal pension plan. The same applies if you were advised to transfer your deferred pension from a previous employer's pension scheme into a personal pension scheme.

Most insurance companies have set up special departments whose sole function is to ensure that a mis-selling review is carried out in strict accordance with the guidance issued by their regulator. You will be advised of the outcome of the review and how the company proposes to compensate you if their advice is found not to be sound.

Any action to rectify the situation will usually be in the form of either payment of compensation directly into your pension scheme, or full reinstatement of your pension rights under your old company pension scheme.

If you are not satisfied with the response you receive from the Compliance Officer, you should then take your complaint to the Financial Ombudsman Service (FOS). The address of the FOS is as follows:

Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London
E14 9SR
Tel: 0845 080 1800

The firm that advised me has since gone bust. What can I do?

If you want to claim against a failed investment firm, for example an Independent Financial Adviser (IFA), you should write to the Financial Services Compensation Scheme (FSCS). The FSCS can only help you if the firm cannot return the money or investments it owes you, or cannot pay for the losses it may have caused.

Their address is as follows:

Financial Services Compensation Scheme
7th floor Lloyds Chambers
Portsoken Street
London
E1 8BN
Telephone 020 7892 7300

My employer discontinued their final salary scheme and introduced a group personal pension plan instead. Is this mis-selling?

Employers are not obliged to operate an occupational pension scheme and can cease sponsorship of such arrangements. If they do not have pension provision in place they must provide 'access' to a Stakeholder pension scheme unless they are exempt. This would not be classed as mis-selling. However, if you could have stayed in your occupational scheme but have instead been advised to join the group personal pension scheme, this could constitute mis-selling depending on the circumstances.

I have received a compensation offer after I was mis-sold a personal pension. Is it a fair offer?

The main role of TPAS is to help individuals who have specific problems about their rights under occupational, personal pension or stakeholder pension schemes. We also provide general factual advice and information about all aspects of pensions through our helpline.

TPAS is not able to advise you whether the offer you have been made is a satisfactory one. We are not authorised to give specific individual investment advice by the Financial Service Authority (FSA). We can however give you some information about the process of compensation.

You should initially consider whether you need to ask the company who sold you the pension for more time to consider the offer they have made to you.

You should check with the company whether they have explored the possibility of reinstating you into your original company pension scheme. This is usually the preferred option, as it puts you back in the position you would have been in, had the wrong advice not been given. This is often not possible, however, as there is no legal obligation on your former scheme to allow you back in. If reinstatement is not possible, any compensation offer will almost certainly have been made in accordance with the industry guidelines. You can obtain a copy of the guidelines used for calculating the redress amount and you may wish to ask the insurance company for the relevant sections of the guidelines. Alternatively you can get these from the FSA Publications Order Line on 0845 608 2372 but they will make a small charge for this.

We suggest that you ask the company for confirmation of all the data that has been used in carrying out your review and that you check whether the data is in fact correct. The information you need to ask for is a 'simplified comparison'.

If you are not satisfied with the redress amount, you have the right to appeal to the Financial Ombudsman Service (FOS) whose address is as follows:

Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London
E14 9SR

It is likely that all the FOS will do is to check that the offer has been made in accordance with their guidelines. They will not check the actual calculations.

You could also consider taking advice on this matter from an authorised Independent Financial Adviser (IFA) but you would have to pay for their services. You should check that the IFA has previous experience of checking mis-selling compensation offers. You should also ensure that you ascertain how much they charge for their services before you commit to them. IFA Promotions (telephone number 0800 085 3250) will be able to provide you with the names and addresses of IFAs in any particular area. Alternatively, you could use the “Find an Adviser” search facility on the website of the Society of Financial Advisers (www.sofa.org).

So basically I have to trust a firm that previously mis-sold me a pension to calculate my compensation offer correctly?

Yes, but as mentioned before, you do have the right to appeal to the Financial Ombudsman Service if you believe that this has not been done properly.

What was the deadline to have your case checked?

People who wanted their case checked had to ask for a review no later than 31 March 2000.

But what if I have missed the deadline?

In this situation then firms are not required to check your case using the 'special pensions review procedures'. The firm may decide to use the 'special pensions review procedures' but do not have to. This is up to each firm to decide.

If I make a complaint how will the firm handle it?

Firms must follow set procedures when investigating your complaint. Generally they will:
acknowledge your complaint in writing within 5 business days
attempt to complete the investigation within 2 months; and,
on completion of the investigation write to inform you of the outcome
If the investigation is not completed within 2 months, the firm must write to you to explain the delay and say:

• that they are continuing to investigate the complaint; and
• that if you are not satisfied with the progress of the investigation, you may refer the complaint to the ombudsman.

I have read in the press that an assumed rate of growth was used in the redress calculations which may not be borne out when I reach retirement. If this is the case and I have already signed the discharge form accepting the full and final offer, is there anything I can do?

It is understood that the Financial Ombudsman Service will not be able to accept fresh claims from people who have already accepted pay out.