Thousands of people could get compensation for being wrongly advised to transfer out of their defined benefit (DB) pension to a defined contribution (DC) scheme, the Financial Conduct Authority (FCA) has found.
The watchdog has written to 2,677 people who have transferred from a DB pension since the were introduced in 2015, after learning that four adviser firms - which have now gone bust - gave them 'unsuitable advice', putting them at risk of being worse off in retirement.
Claims against bad pension advice, where the firm has since ceased operating, can be paid up to £85,000 under the , so the regulator is urging these people to get in touch to see if they can claim compensation.
Here, Which? looks at who has been sent the letters, how to spot poor advice, and how to claim if you've been affected.
Most schemes now allow you to But under the rules, anyone wanting to transfer must get financial advice from a regulated adviser if the 'transfer value' - the amount your provider will offer you for transferring out of your DB scheme - exceeds £30,000.
However, the FCA has recognised that advisers could have offered poor advice in order to get paid, under a charging model often referred to as 'contingent charging', meaning a client only pays for the advice if they go ahead with a transfer.
Last year it after it found cases of people being advised to transfer out of valuable DB schemes despite it not being in their best interest, but it's still identifying instances where people may have been given bad advice before the ban was introduced.
The FCA wouldn't reveal the names of the four adviser firms it has found were giving 'unsuitable advice' before going bust. But it told Which? it has sent letters to three groups:
The FCA says that transferring from a DB scheme isn't the right option for most people, especially if: it's your main or only pension; you'll rely on the income throughout retirement; your DB scheme meets your needs; or you have dependents who might prefer some of the DB pension features such as a guaranteed income rather than a lump sum. Therefore if your adviser has pushed you to make a decision to transfer when it's not in your best interest, you may be able to claim compensation.
It's important to note that the contingent charging ban won't stop fraudsters trying to prey on your finances, so make sure you're dealing with a regulated financial adviser by checking the . Be particularly wary if:
In June 2020, the FCA asked firms where it had identified issues to write to their customers and alert them that they may have been mis-sold pension transfer advice.
If you haven't been contacted by your pension provider or the FCA, and feel you've had poor pension transfer advice here's what you'll need to do.
Contact the adviser as soon as possible in writing, so you have a record of what's said.
The FCA says financial services firms it regulates must respond within eight weeks with a 'final response letter' with its findings, and note if your complaint has been successful.
It will ask the firm to explain what it thinks happened and then decide whether to uphold your complaint.
You must contact the ombudsman service within six months of receiving a final response letter or it may not be able to help.
If you think you've received bad pension transfer advice, and the company that advised you is no longer in business, you may be able to claim via the, which may be able to compensate you up to £85,000 if it concludes that you've suffered a financial loss as a result of the poor advice you've received.
It's really important to shop around when looking for a financial adviser. A comparison site is a good place to start: Unbiased and VouchedFor are the biggest. You can use their filters to make a shortlist based on areas of expertise and customer reviews.
We recommend setting up meetings with at least three IFAs so you can decide which can provide you the best service for your needs, and the best value for money.
You'll be charged a fee to get advice in most cases, but these may vary depending on the adviser and it can be tough to work out what you will b charged. When in April 2021, we found 89 showed no pricing online.