Missold/advice to switch from Defined Benefit Scheme

pbs31866

Is there a similar process to PPI that allows individuals to seek compensation when they were ill advised to switch from a Final Salary (Defined Benefit) pension scheme to a Money Purchase (Defined Contribution) scheme?

I, as well as a number of new University graduates, joined my current company in Sept 1993 and was enrolled in the company's Final Salary pension scheme. In 1995, a merger between my company and a rival took place to create a new merger. At this time, staff were consulted about their pensions by the company's financial advisors regards their future pension plans. I recall meeting with a specific advisor and the recommendation due to my service and age was that a money purchase scheme would be better for me than the final salary scheme as I was young and would likely change jobs and companies in the future. I am still with the same company now about to complete my 25th year of service.

In 2000, my company then merged with another rival. At this point staff were given an option to opt back in to the Final Salary scheme that I did. There were a lot of my fellow colleagues who similarly opted out in 1995 with some opting back in during 2000 and those that did not.

Speaking to one of my work colleagues suggested that I speak to the Financial Ombudsman as this appears to be a case of pension mis-selling similar to PPI. I would like to reclaim compensation for my lost 7 years of Final Salary contribution so that I will have 25 years continuous contribution instead of the 18 years from 2000.

redpete

You presumably agreed at the time that you would likely change jobs and companies in the future. You would have to show that the advice you were given back then was poor advice based on what the advisor knew about your circumstances. Hindsight might show it worked out less well for you but was that foreseeable?

Dox

pbs31866 wrote: »

Is there a similar process to PPI that allows individuals to seek compensation when they were ill advised to switch from a Final Salary (Defined Benefit) pension scheme to a Money Purchase (Defined Contribution) scheme?

I, as well as a number of new University graduates, joined my current company in Sept 1993 and was enrolled in the company's Final Salary pension scheme. In 1995, a merger between my company and a rival took place to create a new merger. At this time, staff were consulted about their pensions by the company's financial advisors regards their future pension plans. I recall meeting with a specific advisor and the recommendation due to my service and age was that a money purchase scheme would be better for me than the final salary scheme as I was young and would likely change jobs and companies in the future. I am still with the same company now about to complete my 25th year of service.

In 2000, my company then merged with another rival. At this point staff were given an option to opt back in to the Final Salary scheme that I did. There were a lot of my fellow colleagues who similarly opted out in 1995 with some opting back in during 2000 and those that did not.

Speaking to one of my work colleagues suggested that I speak to the Financial Ombudsman as this appears to be a case of pension mis-selling similar to PPI. I would like to reclaim compensation for my lost 7 years of Final Salary contribution so that I will have 25 years continuous contribution instead of the 18 years from 2000.

That was not unreasonable advice for younger employees in the mid-1990s. You were given advice based on the probability that you would change jobs/employers in the future. Presumably you agreed with this or you would not have chosen to go the DC route?

You won't get compensation based purely on hindsight. You would need to show the advice was incorrect - and given what you've said, and when the advice was given, that may not be entirely easy.

kidmugsy

Wouldn't you have to demonstrate a loss? Wouldn't any loss depend on how well you invested your DC money? If you invested it unsuccessfully isn't that your own fault?

How would allowance be made for the advantage of the DC money being available from age 55 or so, without the actuarial reduction that would be inflicted on an FS pension taken at that age?

Who do you claim did the actual misselling? If the advisor, how was he meant to know that you would follow a rather unenterprising career path?

Brynsam

pbs31866 wrote: »

Is there a similar process to PPI that allows individuals to seek compensation when they were ill advised to switch from a Final Salary (Defined Benefit) pension scheme to a Money Purchase (Defined Contribution) scheme?

Yes. It was called the review of the misselling of personal pensions and took place (primarily) in the 1990s.

By the time you took advice and decided to move to a DC pension, the issues with advising people to move out of a DB scheme and into a DC scheme were well known and it highly unlikely any adviser would not have covered their backs by ensuring their advice took this into account. The projections you will have been given were based on the statutory requirements in force at the time.

Just because things didn't turn out in the best possible way for you financially doesn't mean you were missold. You would also need to explain why, given that you opted back in to your final salary scheme in 2005, you have done nothing for 13 years. FOS isn't there to find in favour of a complainant where the complaint is heavily based on hindsight and picking the better of two options.

dunstonh

Is there a similar process to PPI that allows individuals to seek compensation when they were ill advised to switch from a Final Salary (Defined Benefit) pension scheme to a Money Purchase (Defined Contribution) scheme?

There is no special process for PPI complaints. It uses the standard complaints process.

However, there was a special process that required a pro-active review of ALL pension sales made between 1988 and 1995. Unlike the normal complaints process, firms had to review ALL sales and report to the regulator the progress.

Nearly all sales were reviewed but a few stragglers were not due to things like unable to find the policyholder (moved and not located) or consistent non-response by policyholder.

Speaking to one of my work colleagues suggested that I speak to the Financial Ombudsman as this appears to be a case of pension mis-selling similar to PPI.

its not similar. PPI was mostly put in place non-advised by unqualified and unregulated individuals. Indeed, the PPI uphold rate on advised cases by advisers is just 5%. It is not seen as an adviser issue. Whereas pension would be an advised issue.

Also, the FOS is not an ideal place to start as they cannot review a complaint until the firm has received the complaint and given their response. The FOS is an independent arbiter of complaint outcomes. Plus, the FOS telephone line will tell you that it is wrong (whether it is or isnt) and tell you to make a complaint. The wording is almost script like "this is something we would like to look at". So, it wouldnt give you any new information or useful. It would just be telling you to put the complaint in.

At this time, staff were consulted about their pensions by the company's financial advisors regards their future pension plans. I recall meeting with a specific advisor and the recommendation due to my service and age was that a money purchase scheme would be better for me than the final salary scheme as I was young and would likely change jobs and companies in the future. I am still with the same company now about to complete my 25th year of service.

Did they set up that pension or did you buy your own yourself?

It is worth remembering that in the 80s and early 90s, most people thought that using a personal pension instead of a final salary scheme was better. This was largely based on historical returns for the 40 years previous. Returns that would have resulted in a higher income. However, returns today are around a quarter of what they used to be. Plus, the UK economy was much more boom/bust back then and ran high inflation. Often at a level higher than the cap on final salary schemes. So, advice at the time was based on the environment of the time. With hindsight, it turned out to be a wrong judgement call.

There is the possibility of the 3/6 year timebar rule being applied here. You have 3 years from being reasonably aware of an issue to raise a complaint. Going back into the scheme could potentially be used as the timebar trigger for 3 years.

ringer

I had a military final salary pension and was contacted by a "financial advisor" not long after I left in the late 80's and ended up transferring to a with profits policy.
I was advised by a regular contributor to these boards to seek compensation through the Financial Ombudsman. I did and 18 months later I got compensation almost equal to a third of the value of the With Profits fund value.
The Financial Ombudsman have since been in touch again to inform me that I may be entitled to even more.
Wether our circumstances are the same I don't know, but must worth a try.

Silvertabby

ringer wrote: »

I had a military final salary pension and was contacted by a "financial advisor" not long after I left in the late 80's and ended up transferring to a with profits policy.
I was advised by a regular contributor to these boards to seek compensation through the Financial Ombudsman. I did and 18 months later I got compensation almost equal to a third of the value of the With Profits fund value.
The Financial Ombudsman have since been in touch again to inform me that I may be entitled to even more.
Wether our circumstances are the same I don't know, but must worth a try.

No, the circumstances appear to be quite different. It seems that in OP's case, he was advised to switch to his company's DC scheme instead of remaining in their DB scheme as the advisor deemed that would be in his best interests based on the information available at the time. In hindsight, that was wrong - but it wasn't necessarily mis-selling.

You, however, were the victim of an industry-wide mis-selling scandal of epic proportions. When the penny dropped and compulsory reviews ordered, the easy cases were dealt with first. These were the people who had been pursuaded to opt out of their employer's final salary schemes - including public sector schemes - in favour of DC personal pensions and who were still eligible to re-join their employer's schemes. The compensation paid 'bought' them enough service to reinstate their pension records to the level they would have been had they never opted/transferred out.

With people such as yourself, however, it was much more difficult. In theory, the compensation paid was intended to increase their 'pots' to the level needed to buy an annuity comparable with the final salary pension they had given up. Unfortunately, annuities are now such poor value that is unlikely to happen.

I see that you say that you have been told by the FO that you may be entitled to more compensation? Are you absolutely sure that this letter is genuine, and is not from some look-a-like scumbag claims management company looking for the next PPI gravy train?

I was still in uniform at the time of the mis-selling debacle. Even though the Armed Forces are a (notionally) non-contributory scheme, we were still targetted with the glossy literature. It was such a concern, we set up a procedure to deal with opt out/transfer requests.

1. Interview with pay clerk, who would explain that their take-home pay would actually drop, as they would pay more NI.

2. Interview with a Warrant Officer (WO), who would explain the long term ramifications of opting out.

3. Interview with a junior officer, who would check that the airman understood what he had been told by the WO.

4. Interview with a senior officer, who would ask if the airman still wanted to opt out and - finally - produce the forms needed.

Most lost interest at Stage 1. A couple of 'barrack room lawyers' got as far as Stage 2 - I can't remember what the financial advice consisted of, but I do remember that the interviews ended with the WO casting aspersions on the hapless airmens intelligence and parentage at parade-ground volume.

No-one got to Stage 3.

Marcon

Silvertabby wrote: »

No, the circumstances appear to be quite different. It seems that in OP's case, he was advised to switch to his company's DC scheme instead of remaining in their DB scheme as the advisor deemed that would be in his best interests based on the information available at the time. In hindsight, that was wrong - but it wasn't necessarily mis-selling.

It is also noteworthy that the adviser didn't suggest transferring from the DB to the DC scheme, but just using DC for future service. This is another pointer that the advice is likely to be classed as 'good' (i.e. not wrong/mis-sold), since the adviser clearly recognised the value of the DB pension OP had built up.

coyrls

Marcon wrote: »

It is also noteworthy that the adviser didn't suggest transferring from the DB to the DC scheme, but just using DC for future service. This is another pointer that the advice is likely to be classed as 'good' (i.e. not wrong/mis-sold), since the adviser clearly recognised the value of the DB pension OP had built up.

Also there was no opt-out of an employer's pension scheme, just advice on which of the two employer's schemes to join.

Joey_Soap

From what the OP says, if the claim is just based on hindsight, he's going to have a tough job to get any redress. Are the advisers a still around from all that time ago, I wonder? Many have disappeared. My experience is this - My wife was advised "or sold" a unitised personal pension with Clerical Medical from a firm of advisers (salesmen). At the time we both had DB deferred pensions from the same company. Our situations were very, very similar. I was also "advised" to take the unitised pension too, just the same. We decided (wisely) to transfer one and see how it went. With about five years of the Clerical Medical scheme under or belts, I compared my outcome from my deferred DB plan and the wife's. I did a spreadsheet calculation and I discovered that at age 60, there was going to be at least a quarter million pound shortfall in the benefits from the Clerical Medical scheme compared to the outcome of the DB scheme she transferred out from. I put all this in a letter, backed by my calculations. After about three or four months we got a letter from the company I complained to. It said that they had negotiated for the wife to be transferred back into the DB plan. The DB plan trustees had agreed to reinstate everything back as if she had never been away. They were under no obligation to do so, but they agreed and the advisers paid the DB fund whatever it was that was required to make it so. We were very lucky. But we had a firm set of calculations to go on. Could the OP maybe do the same? After 20 odd years it might be a tall order.