Warning over pension claims

By SIMON MOON
Updated: 04:44 EST, 14 May 2007

View
comments

People who want to make a complaint about pension opt-outs have been advised not to waste money using firms that will take a big slice of their compensation.

The number of people registering a complaint over contracting out soared last year.

In 2006/07, 954 individuals contacted the Financial Ombudsman Service in the belief that they were mis-sold an alternative to the State Earnings Related Pension Scheme (Serps) or the State Second Pension (S2P). This was an eight-fold increase on the previous year when there were just 115 complaints.

Earlier this week, the Financial Services Authority (FSA) said up to 120,000 people may have been wrongly advised to contract-out of the state-run schemes since 1988. But the regulator added that there was 'no evidence' of widespread mis-selling of Appropriate Personal Pensions - the vehicle used to contract out.

Around 8m people moved out of Serps and its replacement, S2P, in return for National Insurance rebates paid into a potentially more lucrative personal pension.

The FSA said people may have suffered a financial loss as a result of being advised to contract out when they were already too old to benefit. The watchdog said the average loss to these individuals was likely to be around £7 a week.

Data from the Financial Ombudsman Service (FOS) published today showed a steep rise in the number of people who believe they are the victims of opt-out mis-selling. But it is believed the figures may have been inflated because claims management firms see this an area where they can make money.

Claims handlers have been cold-calling people they think may have grounds to make a complaint and demanding £500 to take up their case, plus a percentage of any compensation they manage to win.

But it is not difficult for individuals to make a claim themselves and the FOS said: 'The main message we have is if a consumer has got a complaint get in touch directly with us.'

The ombudsman is about to publish a booklet telling consumers how they can make a claim. You can pre-order a copy by logging on to the FSA consumer website and clicking on the 'Contact Us' link in the article text.