Pensions - Advice

5 million people remain contracted-out through a MAPPP and people can still choose to contract out of the additional state scheme now known as S2P.

People who were advised to contract out from the late 1980s onwards may end up with a lower pension than the state would have provided. If they weren't made aware of the risks involved when they contracted out, it may be that their adviser was guilty of mis-selling.

Estimates in the late 1980s suggested that men who were above 40 and women who were above 35 should not be contracted out of the state scheme, because the risks were too great.

As much as 60% reduction.

There are a number of reasons why you may be able to make a complaint, including:

• If the adviser did not correctly assess your attitude to investment risk within the context of your overall retirement planning.
• If the adviser failed to explain that the policy could provide you less than the state pension you gave up.
• If the adviser failed to explain the guaranteed nature of the state pension benefits you were giving up in favour of the policy including:
  • A guaranteed pension based on your income during your lifetime.
  • That this pension would increase annually in line with inflation
  • Following your death, a guaranteed spouses pension with the above features
• That you fully understood the nature of these risks and were happy to proceed
• If the adviser failed to explain all fees and charges relating to your policy and how they affect the return on your investment.
• If you bought your policy before 1 January 1995, you should have been given product particulars that included details of charges and cash-in values for the first 5 years of your policy.
• If you took out a policy after that date, you should have received a ‘Key Features’ document with details of fees and charges and their long-term effects on your investment.

A full actuarial calculation is required in line with published FSA guidelines

• The first part of the calculation determines the value of your contracted-out policy after all future charges have been deducted.
• Next, a percentage of your earnings which qualify for a SERPS pension are increased in line with agreed assumptions to your State Pension Age (SPA)
• This is then compared against the capitalised value of your future SERPS benefits, actuarially discounted to 1 October 2005.
• The value of any negative result represents the net redress.
• Future charges are then added to the redress amount to give the gross redress.
• Added to this is an annuity expense (the cost of converting the fund to a pension), around 4% currently.

Inland Revenue rules require that compensation in respect of pension miss-selling be paid back to your pension. If you have already passed the State Pension Age compensation may be made up of 2 separate elements.

• A loss in respect of past pension benefits paid in the form of cash, net of tax; and
• A future annuity based on the difference between what you would have received had you remained in SERPS against that what you actually receive from your personal pension plan.

Since compensation is likely to be paid back to your pension policy, we will send you an invoice for our fees. Our fee for all successful claims is 18% plus VAT. 

• Example: Your personal pension fund is increased by £3,000

Our fee is 18% (21.15% inclusive of VAT) - £634.50

We will gather some information from you to help us assess your grounds for complaining. If we believe you have a valid complaint we will manage it for you. We will advise you on the outcome of your complaint and whether or not we think it is fair. If it is not, we will escalate your claim, with our views, to the Financial Services Ombudsman at no extra cost.

Yes. You may have already been through what's known as a pension mis-selling review in connection with your ordinary personal pension. If so, the sale of your contracted-out appropriate personal pension should also have been reviewed if it was sold to you at the same time as your ordinary pension. Check that this review happened. If it didn't, you may still be entitled to have your sale reviewed now. Please contact us for further details on how to proceed.

We believe that as many as 5 million people may be affected, and if you are one of them, you can do something about it. Using our professional hassle-free claims service, Keypoint Claims can give you expert support with your complaint to win the compensation you could be entitled to. Call us on 0800 280 2324.