We’ve seen it plenty of times in the past; mis-sold insurance and pensions with big banks cheating hardworking individuals out of their money. Yet, once again, history repeats itself and we’re back in the same situation.
Just last year, insurance giant Prudential was fined £24 million for ripping off customers by mis-selling annuities. Reports indicate that the company could have made around £6 billion off the back of pensioners in Britain. To make things worse, the majority of those incredible profits didn’t go to the average worker–it went to their bosses. The company was caught just last year and they’ve already paid out over £110 million to over 17,000 affected individuals. So if you had your annuities with Prudential, now would be a good time to have a word with them.
Again, this is sadly not as uncommon as we’d like it to be. A mis-sold pension is common because seniors are easier to take advantage of. Research suggests that over 90,000 of pensioners that bought annuities since 2008 could be owed money. But what exactly caused this and why are people buying annuities in the first place?
Annuities are complicated and easy to fool people with
Annuities are usually bought when someone retires. They’re complicated, but they promise that a pension pot can turn into guaranteed income for life. Unfortunately, due to their complex nature, it’s all too easy to misread something and be scammed out of your money. In fact, annuities used to be the most common way for someone to fund their retirement since it guaranteed income. Unfortunately, they’re regarded as poor value now due to low-interest rates that have gotten worse since Brexit.
In fact, the sales of annuities dropped by 58% due to pension freedoms which gives seniors over the age of 55 the freedom to do anything with their pension funds. Before, they could take out a quarter of their savings in a tax-free sum and then buy an annuity with the rest for a lifelong income. However, pension freedom now gives you more control over what you can do with your money.
So what about my mis-sold pension?
Your mis-sold pension doesn’t necessarily have to be an annuity. It’s just one example of a commonly mis-sold pension scheme. Another form would be self-invested personal pensions, also known as a SIPP.
Unfortunately, a SIPP can cause massive losses due to high-risk investments that place you in a win-or-lose situation with your pension on the line. Due to the risk, it’s a common pension to mis-sell to people who aren’t aware of the consequences. As a result, you may want to consider making a claim for compensation if you were mis-sold a SIPP pension or a similar product in the past.