Pension Dispute & Compensation Claims: Protect Your Retirement

1. Bad Transfer Advice (DB to DC)

Transferring from a defined benefit (DB/final salary) pension to a defined contribution (DC) pension is one of the most significant financial decisions you can make. The FCA considers most transfers unsuitable unless there are exceptional circumstances—yet thousands of people were advised to transfer, often receiving terrible advice that has devastated their retirement plans.

Signs of bad transfer advice:

• You were not clearly told you were giving up a guaranteed income for life
• The advisor emphasized potential growth without adequately explaining investment risk
• You were close to retirement (within 5-10 years) and needed security, not speculation
• The advisor received a large commission (often £10,000-£50,000+) but didn't disclose this conflict of interest
• You were told the new pension would "definitely" perform better than your DB scheme (impossible to guarantee)
• The transfer value seemed attractive (a large lump sum), but the advisor didn't explain what you were losing
• You needed to access a lump sum for debt, and the advisor suggested transferring rather than explaining you could take 25% tax-free from your DB scheme at retirement
• The advisor rushed the decision, saying you had to act quickly before the transfer window closed

Typical compensation: £50,000-£200,000+, restoring your pension to what it would have been worth if you'd stayed in the DB scheme.

2. Pension Scams & Fraud

Pension scams have stolen billions from UK savers. Scammers use sophisticated tactics to convince people to transfer their pensions into fraudulent schemes, often resulting in total loss of retirement savings.

Common pension scam tactics:

• Cold calls: Someone calls offering a "free pension review" or claiming you're entitled to "hidden pension cash" (pension cold calling is illegal in the UK)
• Early access: Offers to help you access your pension before age 55/57 (almost always illegal)
• Fake investments: Overseas property, renewable energy, storage pods, parking spaces—exotic investments that turn out to be worthless or don't exist
• Pressure tactics: Claims of limited-time offers, pressure to act quickly, or threats that you'll miss out
• Fake credentials: Scammers impersonating legitimate advisors or pension schemes
• Too good to be true returns: Promises of guaranteed high returns (8-10%+) with no risk

If you were scammed: Check the Fraud Compensation Fund website to see if your scheme is listed. Over £81.5 million has been paid to victims. Report to Action Fraud immediately. Claim from the FSCS if your advisor was regulated.

3. SIPP Mis-Selling

A Self-Invested Personal Pension (SIPP) gives you control over your investments. While SIPPs can be suitable for experienced investors, many people were advised to transfer into SIPPs invested in high-risk, illiquid, or unregulated assets that were completely unsuitable for their circumstances.

Common SIPP mis-selling scenarios:

• Overseas property developments: Promised rental income and capital growth, but properties were never built or couldn't be sold
• Land banking: Buying agricultural land supposedly about to get planning permission for housing (it never does)
• Renewable energy schemes: Solar, wind, or biomass investments that collapsed or produced no returns
• Storage pods / parking spaces: Physical assets that promised rental income but had no genuine market
• Unregulated collective investment schemes: Funds not subject to FCA regulation that lost most of their value

Red flags: You didn't understand the investments; they were illiquid (can't be easily sold); the advisor received commission from the investment provider; or the value has dropped significantly.

Typical compensation: £20,000-£100,000+, recovering investment losses plus interest.

4. Administration Errors

Pension administration errors range from simple calculation mistakes to serious failures that cost members thousands. The Pensions Ombudsman regularly awards compensation for these failures.

Common administration issues:

• Incorrect benefit calculations: Your pension is less than it should be due to calculation errors
• Delays in processing: Taking months or years to process transfers, retirements, or death benefits
• Lost records: The scheme can't find your contribution records or years of service
• Incorrect death benefits: Benefits paid to wrong beneficiaries or calculated incorrectly
• Failure to provide information: Not responding to requests or providing misleading information
• Transfer delays: Taking excessive time to process pension transfers, causing investment losses

Typical compensation: Financial loss plus £500-£5,000 for distress (average £2,000). Recent Pensions Ombudsman cases awarded £50,000+ for severe failures.

5. Illegal Early Access (Pension Liberation)

Accessing your pension before age 55 (57 from 2028) is almost always illegal and results in massive tax charges—55% of the amount withdrawn (40% income tax + 15% unauthorized payment charge). Despite this, thousands of people were lured into pension liberation schemes.

How pension liberation works (and why it's a scam):

• A company offers to help you access your pension early, disguising it as a "loan," "investment opportunity," or "pension review"
• They transfer your pension to a new scheme (often overseas), then pay you cash (minus large fees)
• HMRC treats this as an unauthorized payment and charges 55% tax—you must pay this even if you received less than 55% of your pension value
• Many liberation schemes were also scams—the company took your money and disappeared

Can you claim back the tax? No—HMRC will not refund the tax charges. However, you CAN claim compensation from the advisor or company that facilitated the liberation if they were FCA-regulated.

Typical compensation: Full pension value plus the 55% tax charges (155% of the amount withdrawn), restoring you to your pre-liberation position.

The Pensions Ombudsman

The Pensions Ombudsman (TPO) resolves disputes about workplace pension schemes (occupational pensions), including defined benefit and defined contribution schemes, and public sector pensions.

What TPO can help with:

• Pension scheme administration errors or delays
• Incorrect benefit calculations
• Transfer disputes
• Death benefit disputes
• Scheme rule interpretation
• Employer contribution failures

Key features: Completely free. No upper limit on compensation awards. Decisions are legally binding on schemes. Contact: pensions-ombudsman.org.uk or 0800 917 4487.

Important change (2024): TPO now requires complainants to exhaust the scheme's Internal Dispute Resolution Procedure (IDRP) before bringing a complaint to the ombudsman.

Financial Ombudsman Service (Personal Pensions)

The Financial Ombudsman Service (FOS) handles complaints about personal pensions (including SIPPs), pension advice, and annuities provided by regulated financial firms.

What FOS can help with:

• Bad pension advice (DB to DC transfers, SIPP investments)
• Personal pension mis-selling
• Annuity mis-selling
• Charges and fees disputes
• Pension provider failures

Key features: Free service. Can award up to £415,000. Handles complaints about FCA-regulated firms. Contact: financial-ombudsman.org.uk or 0800 023 4567.

Financial Services Compensation Scheme (FSCS)

The FSCS protects consumers when FCA-regulated pension advisors or providers go out of business.

FSCS pension coverage:

• Up to £85,000 for most investment and pension claims
• Potentially unlimited compensation for certain pension advice claims (depending on circumstances)
• 100% of claim value (up to the limit)

Contact: fscs.org.uk or 0800 678 1100.

Step 1: Internal Complaint (IDRP)

Before escalating to an ombudsman, you must first complain directly to the pension scheme or firm using their Internal Dispute Resolution Procedure (IDRP).

How to make an IDRP complaint:

• Write to the pension scheme or advisor explaining the problem and what you want them to do
• Include any evidence (statements, correspondence, advice documents)
• The scheme has specific time limits to respond (typically 2-4 months)
• If they reject your complaint, they must provide a detailed explanation

Step 2: Escalate to Ombudsman

If the scheme/firm rejects your IDRP complaint or doesn't respond in time, escalate to the relevant ombudsman.

Which ombudsman?

• Pensions Ombudsman: Workplace pensions, scheme administration issues
• Financial Ombudsman: Personal pensions, SIPPs, pension advice

Both services will investigate independently, request information from the scheme/firm, and issue a decision (typically within 3-6 months).

Step 3: Legal Action (If Needed)

For very high-value claims (over £100,000-£200,000), or if the ombudsman route is unsuccessful, consider specialist solicitors who handle pension disputes on a no-win-no-fee basis.