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Five mis-selling predictions for 2020

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In 2019, we saw some huge landmark decisions made in the courts, seemingly untouchable SIPP providers forced into insolvency, and the bank try and get away with billions in unpaid PPI compensation!

Here’s how our experts expect it to shape the financial mis-selling market in 2020.

More high-profile court cases

We spent our fair share of time last year representing our clients in landmark cases, and we’ll be doing more of the same this year.

Berkeley Burke has been one of the most high-profile SIPP cases for over five years. Since 2014, the embattled SIPP provider has fought against claimants wanting their mis-sold pension pots back in safe hands.

The legal battle came to an end in October 2019 as Berkeley Burke prepared for its High Court appeal against a judicial review decision.

As we predicted, four weeks before proceedings began Berkeley Burke went into liquidation. This was due to the firm being unable to cover the costs of defending the redress claims made against it.

This case cancellation set a huge precedent for the whole industry. As the Berkeley Burke decision was relevant to a number of cases against other SIPP providers, these were put on hold until the final outcome. The Financial Ombudsman Service (FOS) will now be able to proceed with cases.

As a result of the Berkely Burke cancellation, we look forward to a ruling on the Carey Pensions case. Not only do we expect the court to rule in favour of our client Mr Adams but the decision will also provide more clarity on future SIPP cases against unregulated introducers.

Increased due diligence

As we saw with the PPI scandal, we believe that 2020 will be the year that the market finally gets to grips with the toxic end of the SIPP market. Unfortunately, it won’t put an end to deliberate mis-selling, but it won’t be as a result of lack of appropriate due diligence.

We expect the general public, media and most important, authorities, to put pressure on SIPP providers to ensure greater due diligence.

Due to the increased pressure, we’ll likely see more SIPP providers exiting the market. Similarly, many IFAs could end up leaving the market altogether as they’ll be unable to afford to carry on.

We expect there to be further market consolidation. Last year, we saw Hartley Pensions and Embark buying up the SIPP books of Berkeley Burke and Liberty Sipp.

Impact of Contingent Charging ban

A ban on Contingent Charging is anticipated to come into play this year, and it can’t come soon enough if hard-working Brits and their valuable pension pots are to be protected!

Defined Benefit (DB) pensions, which are often workplace schemes, are extremely valuable. They offer recipients a guaranteed, inflation-proof income, year after year. When pension freedoms were introduced, many DB pension holders were contacted and advised to unlock their pension and switch into a Defined Contribution (DC) pension.

Unfortunately, many of the DB pension holders that were persuaded to switch did so at tremendous financial risk. In many cases, it would have been better advised to stick with their original policy.

The Financial Conduct Authority (FCA) raised concerns after it discovered that an incredible 69 per cent of people were poorly advised. The FCA estimates that the harm created by unsuitable DB transfer advice is around £2bn each year.

Contingent charging is a huge factor in this scandal. This is where a financial adviser only gets paid if a transfer is made. We believe that this creates an obvious conflict of interest. It could even become the next mis-selling scandal if more Brits decide to pursue claims against firms that wrongly advised them to switch their secure pension pots to risky schemes.

In light of its research and alarming discoveries, the FCA wants to change the way that advisers get paid for this transfer advice, meaning that they may have to charge upfront for their counsel. A ban on the charges is an obvious solution to ensure a fair relationship.

Fewer CMC licenses from the FCA

The FCA took over the regulation of claims management companies (CMCs) in 2019. This meant that new and existing firms faced greater compliance and tighter regulations, allowing consumers to be better protected by much higher industry standards.

For CMCs, it meant that fewer licences were granted by the FCA – a welcome decision.

To ensure client confidence in the industry, all firms should operate to the highest standards and offer valuable and appropriate services. Claims should be regulated in the same way as pension investments and transfers are. Once confidence is restored, the industry will be able to move on from the PPI and Sipp mis-selling scandals.

Tighter regulations for CMCs will have a knock-on effect for the pensions industry, as it means that mis-selling claims will be managed fairly and with stricter regulations applied from all sides. This can only help to boost consumer confidence and hopefully persuade more people to take unscrupulous pensions firms to task.

If you’re not sure what the difference between a solicitor’s firm and a CMC is, click here to find out.

Greater awareness from the public

While issues in the industry are being reformed, the government has a responsibility to continue to educate the public. One year on from the pension cold calling ban, we believe that public awareness is on the rise.

2020 may finally be the year when the British public takes a communal stance against rogue firms, scammers and unscrupulous advisers who are looking to make money from their pensions pots or liberate people of their hard-earned money.

Invaluable tools such as the FCA’s ScamSmart website allows the public to get instant information on firms and are an easy way to report wrongdoing in the industry.

Additionally, the FCA is introducing investment pathways to help people decide what to do with their pension pots, rather than go into drawdown without taking financial advice. As part of the initiative, the FCA will also issue “wake up” packs to people at an earlier age, to educate them about their pensions choices.

All of this activity will have the collective effect of increasing awareness around pensions with the British public, which will hopefully help to eliminate Sipp mis-selling and scams.

If you believe you have transferred your pension without adequate advice, click here to learn more about how you can get your pension pot back!