Rogue advisers have caused savers to lose hundreds of thousands of pounds after being abandoned to a “Wild West” of pension rules, according to a Sunday Times report.
Its report shows how some advisers have exploited the outdated laws and loopholes to lure unassuming investors into high-risk products, leaving them unprotected when dodgy bets have gone wrong. Some laws have not been updated since 2003, despite the way pensioners can access their savings changing in 2015.
The advisers can continue to operate as before despite mis-selling products, while investors have been unable to claim full compensation.
As such, around 4,300 – the equivalent of 18 people a day – are being forced to seek help from the Financial Services Compensation Scheme.
Latest figures have shown that almost £19bn was moved out of pension schemes in the first six months of this year, after a record £34.2bn was transferred last year.
According to the Sunday Times, more than three savers a day are receiving the maximum £50,000 payout from the FSCS, while 1,500 investors had complaints about their mis-sold pensions kicked out because they did not report the problem early enough.
Former pensions minister Baroness Altmann told the Sunday Times: “It is not acceptable for people to be exposed to a ‘Wild West’ in financial advice, where they may unsuspectingly use an adviser who has just joined a new firm straight after walking away from compensation claims [for advice] that left a trail of destruction and loss for previous customers.
“There needs to be a reliable record of names, qualifications and expertise of all independent financial advisers, with the ability to strike people off the register or place cautions next to their names that will reflect past problems,” she added.
As things stand, investors can make a claim against an adviser through the Financial Ombudsman Service, which has the ability to award up to £150,000 plus interest, but only if the firm has not shut down. If the firm has closed, any compensation claim gets passed to the FSCS. However, the financial adviser is able to set up a new firm under a different name – known as phoenixing.