Today, mis-sold pension cases are on the rise across the UK and have been rising in prominence for over a decade. Generally speaking, the mis-sold pension claims industry traces the rise back to the late 1980s, where it grew until pension mis-selling in the 1990s became a huge phenomenon in the financial services world.
In this article, we delve into the phenomenon. How did it come about? How far back does it go? We’ve answered both these questions, and more.
The pension mis-selling scandal of the 1980s – how did it start?
You can trace the rise of mis-sold pensions back to the pensions strategy of the 1980s, according to the FT Adviser. At the time, financial strategists encouraged the public to take out personal pensions in a drive to push financial independence. The ‘pensions revolution’ encouraged pension savers to leave their company (occupational) pension to potentially boost returns on the second state pension in the form of a basic pension top-up, effectively by investing in a personal pension.
The view was to encourage confidence in investing and, essentially, offer the chance of taking control (and responsibility) of your own retirement savings.
The motivations for the campaign were largely positive and wanted to help in furthering the prospects of the UK public. However, in encouraging the UK public to move away from the plentiful occupational pensions and, instead, opt for personal pensions, would be the catalyst for the mis-sold pensions phenomenon.
At the peak of the mis-selling scandal (from the late 1980s and early 1990s), some two million people were wrongly advised to leave their occupational schemes in favour of personal pensions. For opportunist financial advisers with eyes on commission, this created the perfect environment for pension mis-selling.
For years after, up until around 1994, a pensions disaster ensued as countless pension providers were fined after having their pension products relentlessly sold with minimal oversight or protection for their investors. Royal & Sun Alliance was fined more than £1.3 million as they failed to identify and compensate around 13,500 victims. Prudential Pensions were fined £650,000 for pensions mis-selling.
Why are mis-sold pension cases on the rise again?
As pension freedoms are increased, so do the numbers of pension mis-selling cases. As with the pensions freedom revolution of the 1980s, in recent years there have been similar cases where pension freedoms are promoted. For example, the Budget announcement of 2014 stated as one of its principle modifications that: “Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, any time they want. No caps. No drawdown limits. Let me be clear: no one will have to buy an annuity.”
Since then, there have been rapidly increasing numbers of savers going straight into drawdown with minimal advice or guidance. With this lack of expert financial assistance, there again exists a space in which opportunist advisers can come in and target investors.
Have you been mis-sold to?
Pension mis-selling is on the rise once again, but with the right information and resources, you can protect yourself and make the right choice. For more information on SIPP claims and general financial advice, visit our blog section. Why not see what our previous clients have said about our service? We’ve helped countless people with their mis-sold SIPP claims, and we could help you with yours.
You can speak to a member of our expert advisory team here. You can also call us on 0161 968 0768.
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