The pension mis selling scandal has its roots in the late nineteen eighties when 'personal pensions' were effectively launched by government, as a result of a change in the law, under the guise of enlarging consumer choice. The effect of the change in the rules was to allow workers who paid into the 'state earnings related pensions' (SERPS) scheme, which was effectively administered and overseen by government, to withdraw their pension credits and place them in a privately run scheme. Unfortunately underperformance in many of these schemes has led to miss- sold pension solictors taking legal action for mis-sold pensions to claim compensation. Salesmen acting on behalf of the private schemes received very attractive commissions on the sale of new business and as a result often cut corners and failed to give the consumer detailed advice in regards to the way in which the private schemes operated. The effect of this was that consumers believed that their new scheme was rock solid as had been the government SERPS scheme and that there would be an enhanced pension with no risk from a scheme run by the private sector. Nothing could be further from the truth.
Private schemes depend on investment in the stock exchange to provide funds upon retirement which is at the heart of the pension mis selling scandal. In their rush to sign up new customers and claim hefty commission, salesmen in the main failed to advise consumers about how exactly their contributions would be dealt with, failed to advise them that their contributions were to be invested on the stock market and failed to advise that investments can go down as well as up. There were also other issues in regards to what was and what was not said by salesmen to consumers at the point of sale and there are many other ways in which private schemes were missold, resulting in much legal action by miss-sold pension solicitors.
The stock market did in fact hold up quite well until the late nineteen nineties at which time the value of many stocks and shares stagnated and a substantial number went into reverse often providing little or no income. The effect of this was that private schemes failed to achieve the growth that had been anticipated just ten years earlier resulting in funds that would, at maturity, pay out substantially less than had the contributions remained in the government SERPS scheme.
It may now be possible for a solicitor to make a mis-sold pension compensation claim against the company that instigated the change dependent on what they told the potential investor prior to the investor switching assets from the SERPS scheme into a private scheme. In general terms, to avoid solicitors legal action the company should have carried out a detailed 'fact find' relating to the investor and thereafter should have made full disclosure of all risks inherent in a private scheme.
Most of these claims arise as a result of overzealous, some would say dishonest, sales techniques whereby most potential investors were not advised that their contributions were to be invested in the stock market and that investments can go down as well as up. Most of those who suffered a mis-sold pension were quite simply under the impression that a private scheme was rock solid as is the case with the government SERPS scheme and that as it was a private investment firm doing business they would receive more than if their money was in the hands of 'inefficient' government bureaucrats. Unfortunately nothing could be further from the truth.
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