Mike Begg: FSCS - 78% of claims have an element of poor advice
Mike Begg, managing director of Beat the Banks, discusses the lack of quality advice when it comes to pension transfers.
It’s now an established fact that thousands upon thousands of pension holders have been mis-advised to transfer their final salary pensions elsewhere.
It’s also sadly an astonishing fact that vast numbers of pension holders who did move seemingly can’t be bothered to check to see if they were mis-advised.
If any more proof was needed of the sheer scale of mis-selling it’s worth listening to the carefully chosen words of Caroline Rainbird, the FSCS (Financial Services Compensation Scheme) chief executive.
She says that a shocking 78% of all the claims they receive contain an element of poor financial advice and that bad advice contributes to a significant amount of the damage that’s caused in the financial services industry.
She highlighted the number of “bad players” in the industry, deliberately or misinformed, that join the world of financial services and cause immense damage.
She added “it’s the type of financial advisers we see unfortunately.”
Ms Rainbird added that “poor pension advice is particularly a growing area for the FSCS.” Many victims she said have been “wrongly labelled” as high net worth individuals.
To be defined as a High Net Worth Individual you required to have an income of £100,000 per annum. However, an astonishing 95% of claimants earned less than that at the time they were given advice to move their gold-plated pensions and that within that 95% significant numbers earned much less than that.
It’s fair to say that Ms Rainbird’s comments echo exactly what we see at Beat the Banks, albeit we would go much further with our blunt commentary. At times between 2015 and 2018 FCA research has shown as much as 48-52% of the advice given to leave final salary schemes was in some way flawed.
Furthermore, every single regulator since 1988 has offered the same simple guidance - the opening position when considering a transfer away from a defined benefit workplace pension should be that it’s a bad idea.
Despite that further FCA research covering the first three and a half years of “pension freedom” confirmed that a staggering 69% who consulted a Pension Transfer Specialist during that period were advised to move their pensions.
The time is well overdue for those who were advised to move their pensions to take these facts onboard. Especially so in these times of raging inflation, rising interest rates, uncertainty in world stock markets and a cost of living crisis in full swing.
We also see multiple cases of pension holders being advised to leave the same pension scheme by the same adviser and then incredibly are recommended exactly the same solution. A classic tell-tale sign of mis-selling.
At Beat the Banks, we’ve collectively worked in the finance industry for hundreds of years. We’re acutely aware of how it works and how pension holders were misled into believing moving away was somehow in their best interests AND remember if you didn’t move your workplace final salary pension NOBODY got paid.