In 2014, then chancellor George Osborne announced plans to reform the way retirees could spend and save their pensions, opening up a new range of options for the over-55s.
But although the changes, which were brought into force in April 2015, meant more freedom for pensioners, scrapping the obligation to buy an annuity product left many people open to mis-information and poor advice from some financial advisors.
Some pensioners were encouraged to move their savings from standard, low-risk schemes and instead invest in high-risk ventures that would bring high reward – which later failed to materialise, causing an estimated £120million black hole.
Last year, the Serious Fraud Office announced plans to investigate the sale of so-called ‘storage pod’ investment schemes, and customers are being encouraged to find out if they could be due compensation.
Here, we spoke to Ken Hanning from mis-sold investment and pension claims specialists, Assist.Claims, to find out more.
What exactly is a ‘storage pod’ scheme?
Traditional workplace and private pensions are quite simple – most people save a set amount each month, which is then placed into a collective ‘pot’ to be invested in stable, low-risk mainstream schemes.
Once you reached retirement age, you then take your share and buy an annuity product, which provides you with a monthly ‘wage’.
However, when new pensions freedoms were introduced in 2015, pensioners were instead able to take their pension in a lump sum, spending it however they wanted.
And as Ken explained, this left a lot of people open to fraud.
"Many of our clients were advised to transfer their pension monies out of large well-known pension schemes, into Self Invested Personal Pensions (SIPPS), which were then invested into ‘storage pod’ type assets.
“In some cases this represented poor advice because the pension schemes they left were broadly based investments, and these were transferred into single asset higher risk 'storage pod' schemes.”
He added: "In almost every case, clients are embarrassed when they first meet us – they feel that they have acted foolishly. But they really shouldn't feel like that.
“Sometimes the advisers themselves have acted in good faith but have been caught out themselves. Some Scottish firms were central to this advice.
"And we represent people from every walk of life – lawyers, magistrates, business owners, nurses, retail workers, and ex-miners to name but a few."
How do I know if I can claim?
You can claim compensation if you received inappropriate pension transfer advice that resulted in lost funds.
This can be a complex process but if you were advised to transfer into a SIPPs and invest into unregulated assets, you could have a legitimate claim.
Ken said: “Claiming compensation can be technically challenging in some cases, but for some clients it can also be straightforward.
“Where a very simple claim is involved, the best advice – if you are able – is to make the claim yourself. However, many of our clients have described the process as 'daunting' or 'too complicated', and that's where we can help.
“Here at Assist.Claims we pursue claims directly against advisers, via the Financial Ombudsman Service (FOS) or via the Financial Services Compensation Scheme (FSCS) – whichever route makes the most sense."
Will I have to pay to make a claim?
"Claims can be more complex where more than one advice firm has been involved. This often happens where clients have been transferred out of 'Final Salary' pension schemes, which are often available through local authorities, large companies or other public organisations like the NHS,” explained Ken.
"We make a charge for our service – but only if we win compensation for our clients.
“If we don't win an award for them, they don't pay us."
This article was brought to you in association with Assist.Claims.