Pensioners lose millions in UK Pension transfer scandal

Published on: October 03, 2023

Investment Adviser, reported on the 2nd September that two financial advisers operating in the UK had been fined and banned by the Financial Conduct Authority (FCA) for switching retirement pots from safe to high-risk unsuitable investments. The regulator described the advisers’ actions as “one of the worst” it has seen.

Transferring otherwise safer “defined benefit” pensions (Employer or Company pensions), to alternative “Money purchase or defined contribution” pensions can create a significant immediate lump sum, but will often result in higher risk outcomes. Defined benefit pensions in general, have valuable guarantees, including tax free cash lump sum, guaranteed retirement income for life and valuable spouse or dependents benefits.

The losses suffered by the customers were catastrophic and by June 2023, the Financial Services Compensation Scheme (FSCS) had paid compensation of more than £19.8m to 511 of the advisers’ former customers. At least 270 customers suffered losses over the FSCS’ compensation cap of £50,000. Were it not for this cap then the compensation amount would have been over £42.3m.

Whilst this is an isolated case everyone reaching retirement age or in retirement should take care to ensure that they receive the best possible advice appropriate to their own personal requirements. Pensions funds are often irreplaceable and are the foundation of a good retirement. Pension planning is an essential part of retirement planning. The protections provided by the regulations help to ensure that an individual has access to information and advice essential for meeting retirement needs.

For more information about pensions see the UK pensions advisory service Money and Pensions, and for help as you near retirement see Pension Wise,


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