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4 Ways in Which You Could Lose Your Pension

There is a sharp rise in claims against financial advisers who have misled pension savers into channeling their money into risky investments. In other cases, pension funds invest members savings in financial products that do not cater to their needs and circumstances. We have highlighted the different ways in which you could lose your retirement savings.

Mis-sold pension

Mis-selling is the situation where an investor is sold a financial product that does not serve their interests or add value to their portfolio. Mis-sold pensions are a pertinent problem for pensioners. Recent data from the Financial Services Compensation Scheme (FSCS) indicates that compensation for mis-selling exceeded £40m in 2018.

The Financial Conduct Authority (FCA) estimates that around 25 percent of savers in the UK had their pension mis-sold. The mis-selling often involves rogue investment agencies enticing savers to invest in dubious schemes that promise returns of up to 20 percent annually. The high rate of mis-sold pensions indicates that most pension consumers are relying on poor advice when making decisions. Far too many savers are investing in products without doing due diligence.

Getting Advice

If you are one of the people who have fallen foul of pension trouble, all is not lost, there is help on hand If you can get claims advice on how to recover your mis-sold pension.

Final salary pension transfer

Final salary schemes are funds employers created to provide employees with an income during retirement. Final salary schemes involve a commitment by an employer and the employee to contribute a certain amount of money to the fund over the course of employment.

The amount of income one gets in retirement depends on variables such as inflation, salary and type of fund. You should keep track of your final salary pension transfer because the scheme can go bust, leaving you without an income in your twilight years.

Annuity claim

A recent report from the FCA indicates that over half a million people in the UK hold mis-sold pension annuities. It estimates that compensation for mis-sold payouts could run into billions of pounds once the victims make annuity claim. Some of the reasons for mis-selling include savers relying on pension providers to shop for investments on their behalf.

According to the FCA, 60 percent of savers do not switch pension providers when they retire. Most of them end with mis-sold annuities because the pension provider did not take their interests into account when investing the funds. Such people would have benefited from seeking an annuity investment in the open market.

It is critical that you make an informed decision when committing your funds to an investment. Ideally, you should engage the services of a reputable financial advisor when looking for an annuity fund so that they can get you one that suits your needs.

Defined benefit claim

There are several claims at the FSCS relating to defined benefit schemes. The defined benefit claim relate to savers who were misled into cashing their accrued benefits to make risky investments. The FCA has proposed new regulations to increase the protection limit for bad advice from £50,000 to £80,000. However, the protection is not sufficient because the value pension funds involved are multiples of the protection threshold.

Therefore, it is imperative to take due diligence when handling savings in the defined benefit schemes. Investing such funds is a complex and high stakes process that requires wide consultation and planning. If you choose to invest in such schemes, choose a retirement product that has FSCS protection.