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Claim chasers on the trail of drawdown

Advisers have warned there could be a sharp rise in income drawdown misselling complaints, with claim management firms gearing up to target the sector.

Rockingham Retirement managing director Steve Hunt says he has concerns over clients of advisers who did not look after their funds and who will have lost a lot of money in the economic turmoil.

He believes that claim-chaser firms looking for the next misselling debacle have been buying up internet domain names relating to income drawdown and the retirement sector in general.

The Financial Ombudsman Service says it has seen a 50 per cent rise in the number of income drawdown cases referred to it. In 2007-08, there were 130 cases compared with 88 cases the year before.

He says IFAs must make sure they have a good audit trail to show that the risks of income drawdown were fully explained to the client.

Hunt says: “There have been mutterings that now the endowment misselling run is closed, ambulance-chasers are looking at drawdown and annuities, particularly where individuals have defaulted to a mainstream annuity when they could have secured a much better rate by qualifying for an enhanced rate impaired life annuity.”

Ernst & Young director Malcolm Kerr says the sharp drop in Government Actuary’s Department rates combined with a drop in fund values mean that clients will have been hit by a significant reduction in their income.

Kerr says: “Not all IFAs have properly explained this issue. It could be the next scandal. For the industry’s sake, I hope there are some very well maintained files. If it were me and I had seen a 50 per cent drop in income, I would have some questions to ask.”

Intelligent Pensions managing director Steve Patterson says: “It would not surprise me, having seen what has happened to investment markets. Where the planning has not been done by the IFA, there will be some aggrieved drawdown investors. It would not surprise me if the claim firms started going after this.”

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