Bad advice

What is bad advice? Simply, if you’ve moved your pension as the result of advice, but you’d have been better off staying put, you’ve received bad advice. Typically, most people that received bad advice were advised to move from a defined benefit pension to a personal pension plan, a self-invested personal pension (SIPPs), a qualifying recognised overseas pension scheme (QROPS) or a Section 32 pension plan.

We may be able to pay you compensation if you were given bad advice to transfer out of your defined benefit pension to a different pension and you lost money as a result. The adviser must have gone out of business for us to be able to help. It also must have been regulated by the Financial Conduct Authority (FCA) at the time it gave the advice.

Even if you're happy with your decision to transfer, you should consider making a claim. If you don’t, you may end up with less money in retirement than you should have. FSCS may be able to compensate you up to £85,000.

To start your claim, go to our online claims portal, or start a chat with one of our claims handlers by clicking the 'Need help?' button below.

See how we calculate defined benefit advice claims

Note that we can’t compensate for poor fund performance, nor if your advisor provided information only.

FSCS compensates chef

This customer was working as a chef, with an income of less than £40k p.a. The failed firm advised him at just under age 60 to move a final salary (defined benefit) pension to a new personal pension, a SIPP with a firm that is still live.

Within the SIPP wrapper, the customer was advised to invest everything in a single thing – a holiday resort in Brazil – which did not match his risk appetite. The cash transfer value of the old pension was around £70k, and its estimated value at the time of the claim was around £140k (the customer was guaranteed an income from this pension of around £6k per year).

The customer received an incentive (a cash rebate) of just over £18k to take out the SIPP, but the single investment was deemed to have no value when they claimed with us – so they lost just over £120k.

It isn’t clear if this cash incentive was a driver to take the advice given. We were able to compensate £85k. If the customer chooses to buy an annuity with this compensation, to replace his lost DB pension, in today's market they are likely to get less than £4k per year.

Who else could help?

If you think you might have received bad advice to transfer your pension and the adviser is still trading, you need to take up your complaint with the firm who gave you the advice. If that doesn't work, the next step would be to contact the Financial Ombudsman Service.

While we protect the advice you received to transfer out of your pension, our protection doesn’t include DB pension schemes themselves. The Pension Protection Fund protects these. The Pensions Regulator also protects the UK’s workplace pensions.

For a more detailed explanation of how FSCS deals with defined benefit pension transfers, see our defined benefit pension transfer page

Firefighter compensated by FSCS

This customer was a firefighter, earning under £30k p.a. He had a final salary (defined benefit) pension with a small cash transfer value of £22k, as he was only 36 at the date of claim, and around 30 when he received advice to transfer this into a SIPP.  At the time of claim, the customer suffered serious financial difficulties and poor mental health.

He told his advisor that he wanted to take the cash from his pension and transfer it into a SIPP so he could buy a house within the SIPP wrapper and rent it out.

He told FSCS that they gave him multiple assurances that this was possible. Once the money had been transferred, it came to light he would be unable to purchase a residential property through his SIPP. The money moved remained as cash in the SIPP (held in a bank account) and fees were taken from it so it had dwindled down to £20k by the time he claimed.

His defined benefit pension, although small, would have been worth just over £3k per year from his 65th birthday. Taking into account the cash left in his SIPP, charges, and the benefits he lost by transferring, we calculated his loss at around £100k and were able to pay £85k – some of which will have been paid to his representative as he used a CMC to claim.

Remember, if you’re thinking of moving your pension, ask your advisor ‘Will FSCS cover this advice if this turns out to be bad advice?’

We have a downloadable pdf (0.1MB) of other questions it's worth asking too.