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Only 10 FCA staff investigate pensions mis-selling claims affecting up to 6,000 customers

Posted: 08/04/2019

Building sufficient funds in your pension pot to afford retirement is a challenge that keeps many of us on our toes. An abundance of investment advice from financial advisors on high streets nationwide and online brings further challenges to the unwary investor.

It is heartening that the Financial Conduct Authority (FCA) is now turning its attention to pensions mis-selling, though a point of concern remains the lack of resource dedicated to its investigations. At present it is understood that only ten of the FCA’s 370 staff work in the pensions mis-selling team.

A recent freedom of information (FOI) request to the UK’s financial watchdog has revealed that approximately 6,000 savers have dealt with introducers currently under investigation by the Financial Conduct Authority (FCA). The information, requested by The Times newspaper, reveals that four firms and four individuals are currently under investigation in relation to pension products. None were named, but the total value of pension funds transferred is estimated to be £258 million and the average loss per individual is £43,000.

The FCA is investigating both the individuals and the four unregulated firms that convinced savers to transfer their pension pots to unsuitable products that left them with no protection when they failed.

Unauthorised ’introducers’, generally based in the UK, often play an instrumental role in encouraging and facilitating the transfer of pension funds. They are, in effect, unregulated middlemen, marketing a range of investment products on behalf of investment providers. Their approach is to offer free pension reviews leading unwary clients to transfer their pensions, typically using a self-invested personal pension (SIPP). They often work alongside regulated independent financial advisers whose approval is needed before an unregulated product can be included in the SIPP. 

Customers who take the advice of an introducer risk investing in unregulated products and may not be able to seek redress from the Financial Ombudsman Service or the Financial Services Compensation Scheme, the government-backed safety net that can pay up to £50,000 worth of claims should the firm holding your investment fail. This is the first time the FCA has confirmed it is investigating unregulated providers in respect of Defined Benefit (DB) transfers. Pressure is now mounting on SIPP firms to take more responsibility for the investments they allow in their products.

Last month the FCA published a “Dear CEO” letter warning providers they must be able to show advisers are ‘responsibly and appropriately’ recommending their products when accepting DB transfers. The letter also stated that providers should not be encouraging advisory firms to ‘make inappropriate recommendations’. To date, this has led to three SIPP providers (Intelligent Money, DP Pensions and Westerby Trustee Services) declining to accept DB transfers.

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