Mis sold Pension Transfers
Mis sold Pension Transfers
A pension transfers occurs when an individual agrees to transfer deferred benefits from an Occupational Pension Scheme or Private Pension to one of the following:
A pension transfers occurs when an individual agrees to transfer deferred benefits from an Occupational Pension Scheme or Private Pension to one of the following:
• a stakeholder pension scheme
• a Self Invested Pension Plan; or
• a deferred annuity policy where the eventual benefits depend on investment performance in the period up to the intended retirement date.”
A pension transfer involves the movement of pension benefits from a personal pension or stakeholder pension to another personal pension/stakeholder pension scheme.
The FSA Conduct of Business Sourcebook (COBS) details requirements which must be followed before a pensions transfer advisor can recommend a transfer. These include but are not limited to:
• Looking at, and comparing the benefits which are likely to be paid under the defined benefits scheme with the benefits payable under the PP/stakeholder
• Giving you a copy of the comparison highlighting factors which support or do not support the wisdom of a transfer.
• Give you enough information to make an informed decision and also ensure that you understand the comparison and the advice given
The FSA Pension switching Review highlighted 4 main areas of concern:
• Unjustified additional costs
• Unsuitable investments as not taken account of attitude to risk and individual’s circumstances
• Inadequate reviews put in place or the importance of regular reviews was not explained
• unjustified loss of benefits from the transferring scheme
The Financial Ombudsman Service (FOS) has issued a Technical Guide to Redress for Pension Mis Sales.
Compensation for Transfers takes into account a in particular addresses a number of factors:
• Estimated return required to match the benefits being given up at the time of the transfer (the “critical yield”);
• A consumer’s attitude to investment risk;
• The level of any other pension provision the consumer had
• The period of time left from the transfer until the consumer’s retirement
• Was the transfer explained to the consumer – in particular, whether the benefits being given up were considered and explained.
The calculations for redress are highly complex and must compensate Clients for:
• Valuation of the impact of differing and sometimes multiple investment charges on given fund(s) assuming equal underlying investment performance over given period(s) of time.
• Valuation of the impact of differing investment charges on differing levels of investment performance over given period(s) of time.
• Valuation of lost guaranteed annuity terms.
• Valuation of lost fund guarantee.
• Valuation of lost tax free cash entitlement.
• Redress for actual loss – valuation of past loss or gain, and future loss.
