Mis-sold a pension? Calm down, it could be a let down!
As an IFA, I have been waiting to see what the companies who used to chase PPI claims would turn to next. For claims management companies, the financial services sector has been a series of windfalls with low cost endowment mis-selling, followed by the pensions review, followed by PPI, (payment protection insurance), and now noise and fury about annuity mis-selling.
Small ads in the popular press are asking if people believe that they have been mis-sold annuities, especially where they have purchased an annuity from the original pension provider. A number of providers have been required to examine their back-book of business and a number of settlements have been made, not always to the satisfaction of the people involved. The Telegraph on the 23rd November carried a story about an annuity buyer who was rung out of the blue by a provider, who investigated and ultimately offered a settlement of 18p a month and £10.08 to cover back payments, which was not received gratefully. Part of the problem appears to be expectation of an “average” settlement, suggested to be 10% more, or in this case £8 per month.
There are a few messages to take from this, over and above the basic, “don’t count your chickens before they’ve hatched”, the first being before you retire, read the retirement pack you have been sent. There will be included an explanation of the annuity process and a suggestion to use independent financial advice and the Open Market Option. This is not to be ignored; even now the pension income universe has been changed beyond recognition.
A few planning points before you take an annuity;
- Remember, an annuity is a one-off transaction, once you have done it there is no way back, so consider all of your options carefully.
- If you do not know all of your options, (and there are a lot!), seek professional guidance from MAS, the Money Advice Service, (web based), TPAS, The Pensions Advisory Service, (telephone based) or the Citizens Advisory Service, (CAB), (face to face). Not all services are up to speed yet, so please treat this list as a guide only.
- Guidance will outline all of your options, but will not suggest one or the other. A good grasp of the options should make for a more efficient conversation with an IFA, so this is not wasted time.
- If you want someone to make a clear, regulated, (therefore guaranteed), recommendation to do one thing or another, based on your own circumstances, you need (paid for) independent financial advice.
- Find an IFA who does a lot of at retirement business; things have changed dramatically recently, so find someone up to speed.
- Spend 1-2 hours with the IFA, going through your resources in retirement and your aims for the short, medium and long term.
- The conversation should go through your and your spouse’s health and financial resources, immediate expenditure plans, some exploration of life expectancy, other sources of income, desires to leave legacies and any anticipated changes in life style between now and ultimate demise.
- The adviser should do research on all pension funds held and give a best solution for the use of all resources. The solution may not be the same for each different fund and may include taking cash, drawdown, annuity, phased retirement and all stations in between.
- The suggestions, advantages and disadvantages, should be explained in person and in writing. Once you are clear with what is suggested and why, then give permission to complete the process.
- You are free NOT to use a professional adviser, but please consider that you will only have one retirement in your life; most advisers, active in the market, will have one or more a week. If you make a mistake, no one has to pick up the pieces. If I make a mistake, I am in all kinds of trouble!
Contact me with queries
If anyone is looking for general advice, then please write in to the blog and I would be happy to help with anonymous advice posted here. Alternatively, please call us on 0116 253 5600 and ask to speak to an IFA, (Independent Financial Adviser), for a no-obligation discussion.
If you know you need formal advice, have a look at http://bankfield.net/personal/retirement-planning/ or ask around for a recommendation, it might even be me.