Advisers are being targeted by claims management companies offering payment for referring complaints related to defined benefit pension transfers.
Capital Asset Management chief executive Alan Smith was sent a letter this month from Birkenhead-based firm Pension Justice, which claims to be a “missold pension compensation specialist”. The letter asks advisers if they have seen clients who have been poorly advised on a DB transfer, or seen Sipp statements with unauthorised investments.
It says the adviser will get a referral fee or 30 per cent plus VAT of any successful claim Pension Justice makes. The adviser would keep the client for their own business. The letter says one Glasgow adviser has been paid more than £15,000 in referral fees over the past nine months.
Smith says: “Clearly claims management companies are on the rise and they appear to be on the front foot going to IFAs directly and seeking to engage with their clients.
“The payment protection insurance scandal was a watermark but this is coming to an end and so they are looking for a new opportunity.”
In June 2017 consultants Mercer calculated 210,000 DB members had cashed out a combined total of around £50bn since the pension freedoms started in April 2015.
Smith adds: “We have seen such a large number transferring their pensions to Sipps in the past two or three years, which is fine as long as there is no market correction. As soon as there is a market downturn, which happens every five or seven years, a lot of people who know no better will try and make claims. These claims could be bigger than PPI.
“The very IFA companies that might have slightly shady practices may benefit from this at the expense of the good ones.”
The Pension Justice website says it can pursue claims relating to transfers from a Sipp or workplace pension scheme and non-standard investment, as well as annuity misselling, overcharging and free-standing additional voluntary contributions.
The government is consulting on proposals to strengthen the regulation around claims management companies by having seven permissions for claims firms instead of one.