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The types of pension most commonly mis-sold

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In recent years, the Financial Conduct Authority (FCA) has been working to shut down unregulated pension schemes to protect consumers. We discuss the types of pension that are most common for being mis-sold.

Self-invested personal pensions (Sipps)

The Sipp is the most commonly mis-sold types of pension. Sipps were introduced a few decades ago, but were unregulated for much of this time.

The schemes claim to offer clients the ability to have more freedom to choose where to invest their money. Sipp investments are often high risk, high reward and designed for experienced investors. They are essentially suitable for people with a very large income, who can afford to lose the money.

Despite being unsuitable for the everyday person, these are often sold to inexperienced investors. Unregulated introducers will get in touch via cold call – a now illegal practice. The pension type was sold as low risk, though this is not the case.

Small Self Administered Schemes (SSAS)

These types of pension are also commonly mis-sold. Many cases have recently come to light.

Generally, a SSAS is designed for those who operate and work in small companies to be able to run their own pension schemes for employees, established by the directors themselves. However, companies regularly set up these schemes simply to get around regulatory loopholes.

A company is set up for the client, named after their address, or other personal information such as year of birth. The client is then listed as the director.

While the company lies dormant, the director is still responsible for legal documents such as tax returns. The idea is to move responsibility for the pension administration and investment decisions in unregulated assets from the initial pension company, to the individual client.

Qualifying Recognised Overseas Pension Scheme (QROPS)

These pension schemes are based abroad. They are not suitable for the general public and are aimed at expatriates or other UK citizens who are intending to move abroad in retirement.

More than half of these schemes are based in Australia. Other popular countries are Gibraltar, Malta and the Isle of Man.

In many cases, clients do not know that their money has been moved overseas. With less regulation than UK companies, clients are left with few avenues to pursue should their high risk investments fail. In the event of this happening, the FSCS are unable to compensate people. We would recommend chasing the companies directly through the courts.

Been offered these types of pension?

The FCA is looking to put an end to loopholes and avenues where scams and fraudulent schemes have operated. One of the most important solutions is to raise awareness and circulate information.

It’s risky when people transfer their pensions from stable schemes into one of the above types of pension. Often, money ends up in unsuitable arrangements with unregulated, high risk investments.

In many instances, clients have nothing to suggest anything is wrong with their investments until it’s too late. They are often left without their life savings.

If you have invested in the above pension types, get in touch. We can tell you if you have been mis-sold and help you get your money back.