pension miss sold?

now3d

Hello

Could I ask if anyone knows what steps I could follow to investigate if my pension was miss sold please.

My pension "valuation" (the transfer value), has gone down 23% in real-terms over the last 6 years. I calculated this real-terms drop by comparing the % that the amount grew, and inflation. It is down over 2k over what it was 6 years ago.

I found it has only grown by 5% over the last 6 years, however 1.5% per year is taken out in various pension and fund management charges..

* I did not know (or understand there would be) these ~1.5% charges.

* I accept that funds go up, and down, but am still disapointed its not grown at any of hte projected rates (3%, 5%, 7% per anum quoted in the yearly letters)

I took this out via an IFA.

Are there any "pension miss selling" investigations already on-going in the UK? ( I know there are other miss selling, like PPI etc)

Any tips appreciated!

Deru

All the charges will have been pointed out when you signed the papers with your IFA. Do you have a copy of the contracts? Might want to have another look at what each charge is. The pension fund managers will always impose some sort of fee. They won't do it for free and its usually around 1%. I'm assuming the whole 1.5% is going to the pension holding company and not your IFA?

Mine is actually 1% annual charge going to Scottish Widows. Think my IFA takes a fixed chunk from the pension but not ongoing. The 1% is quite significant when the amount gets bigger.

As for the poor performance and losses, that's due to bad economic conditions. Pension performance depends on stock market performance and the value isn't guaranteed so you can get back less than what you paid in. Higher risk with a potential of a higher return... The IFA simply offers 'advice' on financial products based on your risk assessment so can't be held accountable for bad performance. As projections were never sold as guaranteed, I don't think it's miss selling and IFA's will cover themselves by doing risk assessments so only sell you stuff you've agreed to. It's only if they've sold you something completely wrong for your risk profile (or use dodgy methods) that'll give you a case.

What you could possibly do is move your pension to something cheaper. Others here might be able to offer advice on this, which I'd be interested in.

My Stocks & Shares ISA, which I've been told uses similar funds to the pension funds actually dropped around £1500 in value in the past year so I just closed it. Not got round to checking my pension recently... Just hope I don't have any nasty surprises.

As for your question, I don't think there are any "pension miss selling" cases going on. High risk investments to the elderly by First Direct, was the last thing I've heard.

jamesd

What investments are you using within the pension? Have you been regularly adding money to it? What was the unadjusted value six years ago? What is the unadjusted value today? What is the total value of all new money that you have added in between? How have you changed the investments over time?

1.5% fund management charge is standard and is normally deducted from the performance results before they are reported so the performance reflects the effect of the charges. Normally 0.5% of this is paid to the IFA who arranged the deal but terms vary and you should look at what you agreed with yours.

What other charges are there other than the 1.5%?

It's very unlikely that you've been mis-sold a pension. Not completely impossible. But at the moment you're looking at the wrong place because investment returns aren't something that makes a pension mis-sold. What can make one mis-sold to some degree is if you asked for advice about which investments to use and if the recommended investments meant more risk of loss than you were willing to accept. Note that risk of loss means mainly the maximum drop in a bad year, not actual investment performance.

Without knowing the investments we haven't a chance of accurately explaining what happened.

Linton

Deru wrote: »

.....

My Stocks & Shares ISA, which I've been told uses similar funds to the pension funds actually dropped around £1500 in value in the past year so I just closed it. Not got round to checking my pension recently... Just hope I don't have any nasty surprises.

.....

So you buy at a high price and sell at a low one!!!! Is this a good way to make money??

jamesd

It's the classic buy high, sell low strategy at work. The one that causes lots of consumers to lose money instead of making it. But it is emotionally hard to buy low and sell high. Or to watch prices drop and not sell. Or to wait for times of low prices -when all of the mainstream media coverage is saying that the markets are doing badly - and pay in more money than usual, instead of waiting for a boom and paying in more money (another way of buying high...).

Now and over the next year is likely to be a good time to be regularly buying more. No guarantees, just me knowing that markets are down and the European situation will eventually resolve itself one way or another. But there will be lots of uncertainty and ups and downs along the way.

dunstonh

* I did not know (or understand there would be) these ~1.5% charges.

There were disclosed on the illustration issued to you at point of sale. They were also repeated in the illustration that came to you with the cancellation rights and they would have been disclosed in the suitability report as well.

* I accept that funds go up, and down, but am still disapointed its not grown at any of hte projected rates (3%, 5%, 7% per anum quoted in the yearly letters)

You may or may not be aware of the credit crunch and global recession that has occurred in recent years. A 40% drop on the markets over 2007-2009 followed by a part recovery but then a 20% drop in July/Aug 2011. The UK stockmarket is lower than it was when you started. So, expecting 7% a year during a period of decline is unrealistic.

Are there any "pension miss selling" investigations already on-going in the UK? ( I know there are other miss selling, like PPI etc)

No. There are statistically very few pension mis-sales nowadays.

From what you say, the value of the pension is higher than what it was at the start and given the period in question, it seems within range of what you would expect given the events. It appears that problem is more to do with your lack of understanding of how investments work and not being aware of the economic issues around the world rather than it being mis-sold. Hopefully, you have been paying in monthly over that period as that will give you benefit in the future. If you havent, then you have missed out. However, as there is no indication of mis-sale here, the best thing you can do is try to understand the basics of investments and how they zig zag in value and that a negative period does not equate to a mis-sale. Especially when it doesnt even cover one economic cycle yet.

Thrugelmir

now3d wrote: »

My pension "valuation" (the transfer value), has gone down 23% in real-terms over the last 6 years. I calculated this real-terms drop by comparing the % that the amount grew, and inflation. It is down over 2k over what it was 6 years ago.

Have you increased your contributions every year to combat the effects of inflation?

atush

Linton wrote: »

So you buy at a high price and sell at a low one!!!! Is this a good way to make money??

I agree. Selling off an ISA because the market dropped this fall just means you have locked in or crystalised any losses and missed out on any recovery.

This is what a lot of small investors do and wonder why they lose money whereas many like me have been buying since august. Some good value things out there, paying pretty excellent dividends.

Deru

Linton wrote: »

So you buy at a high price and sell at a low one!!!! Is this a good way to make money??

Definitely not good but I didn't exactly choose what to buy in this. Just stuck money in an ISA as advised by IFA. Aware that I've crystalised the loss but frankly, with market conditions as they are, I wouldn't be surprised if it dropped another thousand.

I stuck to it at IFA's advice after seeing £1K drop, only to see it drop another £500 by the end of the month. At the same time, I'm paying £20 a month towards IFA fees to 'look after' the funds, plus 7.5% charge per subscription and a 0.5% trailing commission per year. If I'm to continue with this, I'd be paying that £20 for a long time... With this in consideration, I figured it'd take too long to recover what I lost already if ever so opted to take it out and earn the money back elsewhere (eBay'ing, PC repairs, etc).

atush, do you choose what to buy in yours?

Linton

now3d wrote: »

Hello

Could I ask if anyone knows what steps I could follow to investigate if my pension was miss sold please.

My pension "valuation" (the transfer value), has gone down 23% in real-terms over the last 6 years. I calculated this real-terms drop by comparing the % that the amount grew, and inflation. It is down over 2k over what it was 6 years ago.

I found it has only grown by 5% over the last 6 years, however 1.5% per year is taken out in various pension and fund management charges..

* I did not know (or understand there would be) these ~1.5% charges.

* I accept that funds go up, and down, but am still disapointed its not grown at any of hte projected rates (3%, 5%, 7% per anum quoted in the yearly letters)

I took this out via an IFA.

Are there any "pension miss selling" investigations already on-going in the UK? ( I know there are other miss selling, like PPI etc)

Any tips appreciated!

The FTSE100 index is much the same as it was 6 years ago. You may have heard of the credit crunch when that index dropped by nearly 50% betweenlate 2007 and early 2009. Even a FTSE tracker, with very low fees would be struggling to have made much of a profit in cash terms, never mind inflation linked, in that period.

However, assuming that you have continued to pay into it over the past 6 years you would have had the opportunity to buy units at significantly cheaper prices than they are now.

So whether your pension has performed unusually badly or not depends on the funds in which it was invested and perhaps more importantly whether you have being paying into it since 6 years ago.

Linton

Deru wrote: »

Definitely not good but I didn't exactly choose what to buy in this. Just stuck money in an ISA as advised by IFA. Aware that I've crystalised the loss but frankly, with market conditions as they are, I wouldn't be surprised if it dropped another thousand.

I stuck to it at IFA's advice after seeing £1K drop, only to see it drop another £500 by the end of the month. At the same time, I'm paying £20 a month towards IFA fees to 'look after' the funds, plus 7.5% charge per subscription and a 0.5% trailing commission per year. If I'm to continue with this, I'd be paying that £20 for a long time... With this in consideration, I figured it'd take too long to recover what I lost already if ever so opted to take it out and earn the money back elsewhere (eBay'ing, PC repairs, etc).

atush, do you choose what to buy in yours?

If you believed prices were going to continue falling for ever you clearly should not be investing. But is this a sensible prediction?

Investing is for the long term - think at least 5 years, more sensibly 10. There will be ups and downs in the meantime, but provided you have invested in a diversified range of investments you are historically very likely to make a profit significantly higher than you could make by, for example, bank depost accounts.