What is a Pension?
A pension scheme is a type of savings scheme to help you save money for your retirement. It also has favourable tax treatment compared to other forms of savings. There are several kinds of pension schemes. Some could be run by your employer, and others you could set up yourself. A pension can be more effective than other savings schemes because you don’t have to pay tax on the contributions.
How is a Pension mis-sold?
Many financial advisers advised clients to invest into Self Invested Personal Pensions (usually known as SIPPs) to save for their retirements, with assurances of growth beyond other pension or savings schemes.
The money placed into the SIPP by a client is often invested into a number of different funds, with the anticipation that, by managing the funds appropriately, the capital would increase over time and allow the client a bigger pension upon retirement.
The funds were usually chosen by the financial adviser, who would pick investments within the SIPP based on the client’s needs and objectives and were those which reflected their attitude toward risk.
The problem was, many clients discovered they had lost money due to risky investments which they were not properly advised about and the financial advisor had not correctly assessed either the client’s circumstances or their attitude to risk.
Reasons for mis-sale
There are a number of possible criteria for mis-sale which resulted in a financial loss including the following reasons:
- You were not fully informed about the risks involved.
- You were sold a pension that was riskier than your attitude to risk
- You were not fully informed about how your money would be invested
- You were advised to opt-out of your occupational pension scheme
- You were advised to transfer out of your occupational pension scheme
- You were not made aware of the commissions being paid to the financial advisor
These are but a few of the possible reasons for mis-sale. In addition to these there are numerous reasons which will be dependent on your specific circumstances at the time.
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