Lost Money on Private Pension

Lancashire_Hotpot

Both may parents have been paying in to private pensions they were sold just over 30 years ago. My mother turned 60 earlier this year and was shocked (though she had been prepared to some extent!) to find out that the value of her pension had dropped to 1/3 of what she had been led to believe it would yield. My dad turns 65 in 2010 and is expecting a similar shortfall on his private pension. Do they have any grounds to claim some sort of compensation for having been mis-sold their pensions?

yelf

None what so ever. We've just been through the biggest recession since 1930s - the financial world nearly collapsed - who they gonna sue?

In a few years it will pull back some of the losses. Really they should have moved into a cash fund a few years ago.

dunstonh

My mother turned 60 earlier this year and was shocked (though she had been prepared to some extent!) to find out that the value of her pension had dropped to 1/3 of what she had been led to believe it would yield.

How frequently did you mother review her pension?

30 years ago means she hasnt got a personal pension. It is probably a retirement annuity contract and chances are its in an obsolete investment. It may have guarantees that could be highly valuable that make up for that.

30 years ago, you could quadruple your money every 10 years. In the last 10 years you broke even on average. If she was basing her retirement on what happened 30 years ago and never reviewed it since then that is not clever.

Also, one of the biggest failings people have with pensions is that they start off paying £x per month but dont increase it every year to keep up with inflation. So, 30 years ago she may have been paying £20 pm but that would need to be around £200 a month now to have the same sort of real terms value. Did she increase it?

Do they have any grounds to claim some sort of compensation for having been
mis-sold their pensions?

The answer will be no because they wouldnt have been mis-sold. Plus, there was no regulation 30 years ago and if they havent reviewed the retirement planning in 30 years then it is their own fault, no-one elses. Don't mean that to sound harsh but you cant just pay an amount for 30 years without increasing it, reviewing it and seeing how its doing.

Why do you think they have been mis-sold?

Lancashire_Hotpot

Thank you for your quick reply dunsonh. It's been very useful and enlightening. As they were both self employed with their own small business they have had the same Financial Advisor for those 30 years. It sounds like they should have discussed other options with him (or he should have advised them some time ago to move the money??).
Thanks again!

dunstonh

As they were both self employed with their own small business

Which means they get lower state pensions as self employed dont qualify for the second state pension.

they have had the same Financial Advisor for those 30 years. It sounds like they should have discussed other options with him (or he should have advised them some time ago to move the money??).

Depends on whether he was transactional or servicing. Transactional often wait to be asked to do something. Servicing will usually prompt.

I would have thought that over 30 years and using an adviser they would have increased the premiums many times. How much were they paying in each month?

bendix

dunstonh wrote: »

Don't mean that to sound harsh but you cant just pay an amount for 30 years without increasing it, reviewing it and seeing how its doing.

Oh, but dunstonh, you know how busy modern life is. What with worrying about Xfactor and Jordan's love life and that ugly mad scottish bint who was flavour of the month for a week or so recently, how can one be expected to take any interest in such trifling matters as how to fund one's retirement?

EdInvestor

dunstonh wrote: »

Depends on whether he was transactional or servicing. Transactional often wait to be asked to do something. Servicing will usually prompt.

How many IFAs explain this when flogging their first product?

How many clients have ever heard of the difference?Given the prevalence of upfront commisssion selling over the years, how many actual 'servicing IFAs' are there dealing with clients of average or low net worth?

Very very few I'll bet.

edda

EdInvestor wrote: »

How many IFAs explain this when flogging their first product?

How many clients have ever heard of the difference?Given the prevalence of upfront commisssion selling over the years, how many actual 'servicing IFAs' are there dealing with clients of average or low net worth?

Very very few I'll bet.

Only just heard of it today

Tried to google to find out more - none the wiser now :o

dunstonh

How many IFAs explain this when flogging their first product?

The servicing ones will. The transactional ones are not likely to.

Given the prevalence of upfront commisssion selling over the years, how many actual 'servicing IFAs' are there dealing with clients of average or low net worth?

Up front commission or otherwise has little to do with it. Servicing costs money and its often not cost effective for small values to get automatic servicing. Many of the contracts dont allow for payment of servicing and the upfront commission (as you put it) on many pensions is tiny and often doesnt cover the cost of the set up let alone ongoing servicing.

Someone in their late 40s say wanting to put £100 into a stakeholder will earn the adviser around £100. Anyone expecting 20 odd years of automatic servicing on £100 is deluded.