My pension provider is planning to award over £800 to an IFA who mis-sold my pension

homeboyz

Hope this is in the correct area - first timer!

I have receieved a statement from my pension provider which details nearly £900 will be awarded to the IFA who encouraged our choice of provider many years ago.

This payment will be - and I quote "1% of the sum re-invested to purchase benefits" and "for advice given"

The pension provider has previously paid out a significant amount of cash to me on the basis that this plan was mis-sold in the first instance.

How can the provider now pay a futher £900 to a person who has clearly - mis-sold the plan!

Apologies if this has been covered anywhere else - I did search the various forum - but could not find any reference.

dunstonh

The way you word it seems to suggest that the fault is not with the IFA but the company (providers dont pay up when the fault isnt theirs). So, the IFA would be entitled to any correction on the same terms that the pension was set up.

homeboyz

Hi, thanks for your input - oddly we were actually advised by the IFA to purchase this product and the IFA arranged it for me.
Several years later the provider actually approached me regarding mis-selling and compensated me directly. This was a while before the vast mis-selling issue became widely publicised.
I was very satisfied with the compensation and the action taken by the provider which was initially at least initiated by themselves.
Kind regards
Dave

Debt_Free_Chick

It sounds as though the IFA is still the agent for the pension plan and you have converted it to an annuity with the current provider. In this case, the agent is entitled to receive the commission payable on the new annuity contract.

It hasn't cost you anything though - the commission is paid by the pension provider out of their funds, not your pension plan.

homeboyz

I agree - it appears that the IFA may well still be registered as the agent for this plan, the activity which prompted the statement is indeed a potential maturity and conversion for the plan now we are retiring (early - thank goodness!). Regarding who pays - well the statement actually mentions that the commision will be taken into account in the annuity payment value. This could be read that I will be penalised for the commision directly - but more likely that annuities are generally subject to the fees and commisions associated at the time (much more likely) bottom line for me is that as it was proven and accepted that I was mis-sold - it seems inequitable that the IFA should continue to receive commission based on "bad advice given".
Apologies if I appear a grumpy old man - but it just feels wrong.

Debt_Free_Chick

I understand how you feel.


If there was no agent for the policy and you arranged the conversion direct, then no commission would be paid. But your annuity would be no different - you would not get a bigger annuity in return for no commission.

The only way to get a bigger annuity is for there to be an agent and for that agent to tell the provider that they are foregoing their commission, in return for better annuity terms.

I don't know why it is this way - but it always has been. Dunstonh might know as he's an IFA.

Arguably, you have "paid" for the commission - but indirectly. The commission is met from the providers overall costs of running their business. You pay in the same way as you pay for rent, power, stationery and staff costs etc .....

dunstonh

homeboyz wrote: »

Hi, thanks for your input - oddly we were actually advised by the IFA to purchase this product and the IFA arranged it for me.
Several years later the provider actually approached me regarding mis-selling and compensated me directly. This was a while before the vast mis-selling issue became widely publicised.
I was very satisfied with the compensation and the action taken by the provider which was initially at least initiated by themselves.
Kind regards
Dave

Can you confirm if its an IFA or a tied agent?

You are saying IFA but insurance companies do not pay redress when an IFA makes a mistake. The IFA pays it. The insurance companies only pay up when they make a mistake or their agent has made a mistake.

The pensions mis-selling period was 1988-1993. Are you saying its before then?

Regarding who pays - well the statement actually mentions that the commision will be taken into account in the annuity payment value. This could be read that I will be penalised for the commision directly - but more likely that annuities are generally subject to the fees and commisions associated at the time (much more likely) bottom line for me is that as it was proven and accepted that I was mis-sold - it seems inequitable that the IFA should continue to receive commission based on "bad advice given".

If you had arranged for an IFA to give your retirement annuity provider, the company would have paid the new IFA. If the old adviser is no longer working, then the provider keeps the commission for themselves.

The only way to get a bigger annuity is for there to be an agent and for that agent to tell the provider that they are foregoing their commission, in return for better annuity terms.

I don't know why it is this way - but it always has been. Dunstonh might know as he's an IFA.

With a legacy contract you havent actually bought a new product. You have excercised an option under the plan which gives rise to a level of payment that was agreed between the provider and adviser at the time of sale. It would be breach of contract for the insurer not to pay it. This is why they keep the money themselves if the adviser no longer is trading.

The open market option requires the purchase of a new product and therefore the terms start with a clean slate.

If this policy is an old retirement annuity contract, rather than a personal pension then its possible guaranteed annuity rates were in place. In which case, it wouldnt matter what the adviser gets paid as those rates would almost certainly be around 50% higher than current rates.

homeboyz

Hi dunstonh, thanks for your further input - you clearly understand the complexities of this area - much appreciated.
To answer your questions:-

The IFA was indeed independent

Regarding when all this happened - I would have to dig to find the actual dates but it was early in the mis-selling period - I would estimate the pension buildr policy was purchased in around 1988 and the compensation could have been around 1998-2000 but I will check if helpful.

The product was a pension builder fund with a one off lump sum - further payments could have been made but I joined an emmployement linked plan after taking out the product. The product is designed to offer a pension on maturity or of course an open market option.

Given your explination I can appreciate there may have been an arrangement for the IFA to be paid should a further product be purchased potentially - thanks for this - however I still find it hard to swallow that if the advice was mis-sold originally surely the contract is now compromised, I know in my wold of work that should I fall in breach all hell breaks out and all bets (and payments) are off.

I believe that should I take the open market option I may approach a third party agent to act on my behalf - would this then steer any comisions to the new agent perhaps?

Robert_Sterling_3

Debt_Free_Chick wrote: »

If there was no agent for the policy and you arranged the conversion direct, then no commission would be paid. But your annuity would be no different - you would not get a bigger annuity in return for no commission

Wot a Chiz

dunstonh

I believe that should I take the open market option I may approach a third party agent to act on my behalf - would this then steer any comisions to the new agent perhaps?

Yes. It would prevent the either the old adviser or the insurance company from getting it. It could get you a better income deal as well. Indeed, even if the new adviser cant beat it, the new adviser would be paid by the old provider.

The IFA was indeed independent

That is very strange. I have not heard of an insurance company paying an IFAs liability before unless its the insurance company at fault.

Debt_Free_Chick

Robert_Sterling wrote: »

Wot a Chiz

Chiz?

Sorry, I'm an old git