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Pursuing your own case – the pros and cons

One question which I am asked perhaps more than any other by propective clients is “Can I not make a mis-selling claim myself?”

The answer, of course, is yes. You can outline your concerns to the firm which gave you advice and if you are not happy with their response you can ask the Financial Ombudsman Service to review your case again, free of charge.

I would not dissuade anyone who had the confidence to do themselves justice from taking that course.

There are benefits, however, to having representation – even though there will be a success fee to pay at the end.

Here is the story of a recent case to illustrate the point:

An NHS doctor (let’s call him Dr A) approached me, concerned at having been mis-sold a Free-Standing Additional Voluntary Contribution (FSAVC) pension plan by Zurich in 1992.

After investigating the sale, Zurich conceded the policy had been mis-sold and offered £3,644.64 in compensation. It said this had been calculated using the loss assessment methodology laid down by its regulator, the Financial Conduct Authority.

If representing himself, it is likely Dr A would have accepted Zurich’s assurance and settled his case.

However, I did not agree the firm had assessed his loss correctly. I argued for an alternative approach and eventually Zurich agreed.

On the revised basis, Dr A’s loss was in fact £23,280.96.

Most people would jump at an offer of that size. I advised Dr A not to, as Zurich had not added interest to this loss for the period he had been deprived of the use of this money.

After an appeal, Zurich agreed to add interest. It calculated an additional £5,482.45 was due, now bringing the total compensation offer to £28,763.41.

Again, I advised against settling because the interest rate used by Zurich was not the one usually recommended by either the Courts or the Financial Ombudsman Service.

Using the correct rate would give interest of £26,991.34, bringing the final settlement to £50,272.30.

Even after fees and VAT, that leaves Dr A more than ten times better off than he would have been if accepting the original offer of £3,644.64.

This, I think, illustrates the value of having representation.

An endorsement from one doctor client

Doctors and teachers are my biggest group of clients mis-sold FSAVC pension plans in the 1990s.

The following article was written by one of my doctor clients and published in the “The Hospital Consultant & Specialist” magazine. I reproduce it here with his kind permission.

“Many people will never have heard of FSAVC pension plans. FSAVC stands for Free-standing Additional Voluntary Contributions, and the schemes were meant for employees to boost their pensions.

In the 1990s, doctors were a prime target for financial advisers selling these plans.

If you’ve never heard of FSAVC plans, you are unlikely to have one or to have the problems associated with them.

The sales pitch was that, if you did not manage to complete 40 years’ service to qualify for a full NHS pension, the FSAVC would make up the shortfall.

High policy charges, commissions paid to the advisers and poor investment performance have resulted in FSAVC plans only providing a fraction of the returns indicated when sold.

If that wasn’t bad enough, the reduction in Lifetime Allowance and the introduction of the tapered annual allowance, subjects to be discussed separately, have further worsened the situation.

Financial advisers were legally obliged to point out other, often much better, options to boost income in retirement. However, because they were paid large commissions by the FSAVC providers many of them failed to do so.

In the mid 90s, I unfortunately took out such a policy. When, about two years ago, I looked at the projected return, it became evident that I would have to draw my pension from that plan for about 40 years just to get back the amount I had originally invested.

At this point, I went back to the original advice I was given and started researching the matter.

Very quickly it became clear that I had been very badly advised, and deliberately so. However, the company providing the advice had gone out of business in the intervening years and so initially I thought all was lost.

There are a few companies who will provide assistance to customers wanting to claim compensation for mis-sold pension plans. Some of the names will be familiar as they also offer to claim compensation for PPI.

Anyone handling a claim for a client will take a percentage of the compensation, often in the region of 30 per cent plus VAT.

After speaking to several of these companies I eventually settled for a one person business [Greg Vaughan Financial Services] as the advice I received seemed tailored to my personal circumstances. Furthermore, there were no extravagant claims as to how much compensation I could expect and the fee asked for was at the more realistic end of the scale.

My circumstances were further complicated by having moved from NHS superannuation to university superannuation and back again.

Due to this complexity, the whole process took almost two years. Finally, though, I was awarded a substantial sum in compensation.

Although a poor decision in the past cannot be reversed, the effects can be ameliorated. It pays not to give up, and to obtain expert advice tailored to your circumstances.”

Paying Additional Voluntary Contributions. Is it Worth It?

There are two types of pension schemes if you wish to make additional voluntary contributions for your retirement. Many of our clients confuse these as they sound similar, but are actually fundamentally different. One generally gives you far better benefits than the other, and we will look at the reasons behind this, and if it was worth using one over the other.

The types of schemes are commonly referred to as AVC schemes and FSAVC schemes, short for “Additional Voluntary Contributions” & “Free-standing Additional Voluntary Contributions” respectively.

Both of these allow members of a workplace pension scheme to pay more into their retirement poi in order to have a larger pension.

The difference between AVC and FSAVC schemes
As we mentioned, the aim of both the AVC and FSAVC schemes is to allow members to squirrel away more funds for their retirement.

FSAVC schemes explained.
These policies are very similar to personal pensions. You pay your contributions into an investment fund managed by an insurance company and the final pension is determined by the performance of the assets in the fund (usually company shares).

FSAVC schemes are totally separate to your company pension scheme and you pay all the set-up and ongoing charges yourself.

Additional Voluntary Contributions explained
AVC schemes are part of your company pension scheme and come in two primary versions: Defined Benefit AVC and Defined Contribution AVC.

Defined Benefit AVC (also known as “Added Years”)
This type allows you to purchase extra months or years of scheme membership, if you have a “final salary” company pension scheme (like most schemes in the public sector). The additional years or months will add to your actual length of service, meaning higher retirement benefits.

Defined Contribution AVCs
These are very similar to the FSAVC, in that you pay monthly contributions into an investment fund. The major difference to FSAVCs though is that your company pension scheme will often pay the charges for you, meaning more of your money is available for investment.

So which scheme is best?

It is hard to generalise and say one is always better than another. Individual circumstances will dictate which is the most suitable for each person.

As a basic guide, however, if you are in a Public Sector pension scheme and you intend staying in it for some years, then you will likely benefit the most from buying “Added Years”.

Similarly, Defined Contribution AVCs tend to be better value than FSAVCs because your employer will subsidise the charges in the former, meaning over time more of your money will be invested leading to a larger retirement fund.

FSAVCs are very much the “poor relation” of both types of AVC scheme. If you were sold one, you should look into whether you were given the best and most suitable advice for you.

FSAVC Pension Plans – why they are bad for your wealth

The FSAVC is the pension plan you will likely never have heard of unless you have one.
The Free-Standing Additional Voluntary Contribution pension plan, to give it its full title, was designed for employees to top up their pension savings.
Doctors and teachers were a prime target for the FSAVC salesmen in the 1990s. The NHS Pension Scheme and the Teacher’s Pension Scheme requires 40 years’ service to be completed if maximum benefits are to be paid. But most doctors and teachers do not have a career of this length, resulting in lower retirement benefits.
The shortfall would be made up, according to the insurance industry, by their FSAVC pension plan.
However, that promise has not been kept.
A combination of very high policy charges and very poor investment performance means most FSAVCs will only return a fraction of the retirement fund originally illustrated.
And in an historically low interest rate environment, the amount of pension that an FSAVC fund can provide is often derisory.
It did not have to be this way, however.
Doctors and teachers had other – much better – options to top up their pension scheme benefits and FSAVC salesmen were required by their regulatory body to make sure this was known and understood before making the sale.
But with large commissions on offer from FSAVC providers, many did not follow the rules.
It is not too late, however, to get your pension back on track.
If your FSAVC was mis-sold, the insurer behind it is required to compensate you.
I have found mis-selling was commonplace. The same rule breaches crop up time and again, with doctors and teachers not properly informed of their options or the risks inherent with an FSAVC plan. Many of my clients receive tens of thousands of pounds in compensation to cover the shortfall in their pension benefits. Any doctor or teacher with an FSAVC plan should have the sale reviewed because this hidden mis-selling scandal needs to be put right.

The dust appears to be settling now on the latest round of the Greek crisis. Nobody, however, should think the matter has been resolved once and for all. That will only happen when one of two things occurs: either Greece leaves the Euro or there is a massive write-off of Greek debt.

The latest bail out deal for Greece requires the country to implement ever harsher austerity measures. For example, the Eurozone has insisted Greece increase Corporation Tax rates on business and, even more crazily, to increase VAT rates on the Greek tourist industry. How is Greece to emerge from this economic nightmare if business cannot invest due to ever higher tax rates, and the only industry that is still properly functioning in Greece – tourism – is made uncompetitive against other countries?

Whilst this economic madness continues, the Greek crisis will never end. Once this bail out deal cash has been spent, Greece will not be able to service its debt again and this whole sorry episode will be repeated. We may be a couple of years away from that again, but for sure it is going to happen.

The Greek crisis rumbles on, with no agreement on a long term solution. Greece has suspended its latest payment to the IMF to the end of this month, which is technically possible but highly unusual. The sort of countries to do that in the recent past include the likes of Zimbabwe and Afghanistan. Not the kind of company a country in the EU should be keeping (in economic terms at any rate).

The Greek crisis is classic case of everyone knowing what needs to be done, but nobody wanting to propose doing it. Quite simply, Greece cannot repay the debts it has. National debt now runs at over 170% of GDP. There is no way Greece can repay this. It stays afloat with bailout monies from the Eurozone and other bodies. But in return, these bodies insist Greece makes repayments of its debts. The only way it can afford to make any kind of debt repayment is to take an axe to spending. This forced austerity has plunged the Greek economy into depression. And because it has done that, tax revenues keep falling, meaning Greece has even less money to service its debt and so needs more bailout monies. But to get the money, it has to cut spending further….

It is a cycle without end, except eventual default. Meanwhile, the Greek people suffer. Yes, they benefited from the corruption that past Government engaged in, building up massive debts to bribe voters. But that is not a reason to keep punishing them. There is no future for Greece, its people or the Eurozone if the present austerity politics is continued.

The solution is obvious. If Greece cannot repay the debt (and everyone knows this) a line should be drawn under it. It should effectively be written off. In return, a whole new package of measures for the Eurozone must be implemented to stop this happening again. The Eurozone itself has to share a lot of the blame for this situation. It allowed Greece in when it shouldn’t have done. And the Euro was created without a lot of the institutions being in place to run a currency properly. Many said back in 1999, at the first sign of crisis, the whole project would be in trouble. And so it proved when the financial crisis hit in 2008.

The time has come to start again. Draw up proper rules for the currency, backed by the kind of institutions that should have been in place to start with. Everyone then starts with a clean slate. There is after all precedent for this. One country in the Eurozone has been forgiven its debts twice in the past century in order to get it back on its feet. Which one? Yes, the one keeping Greece in the straightjacket. Germany. It should read its own history and show Greece the generosity it was shown by the victors of the first and second world wars.

Lloyds Bank has today been fined £117 million by the Financial Conduct Authority (its regulator) for failing to deal fairly with PPI complains in the period March 2012 to May 2013.

This comes as no surprise to me at all. It was obvious during that period that something had changed in Lloyds, when the bank suddenly started rejecting cases out of hand, with a standard letter that was the same in every instance. It was crystal clear the bank had taken a decision to “blanket” reject cases rather than investigate them.

I recall discussing this with some case handlers I know inside the bank at the time. We all said the same then. It will lead to trouble and a fine in the end. All the cases will need to be reopened and it will cost the bank more in the long run. And so it has proved. It is amazing how many times senior executives make this mistake with their complaint handling; thinking they can get away with treating people unfairly. We saw it during the endowment review scandal, and now we see it again with PPI.

Is the fine big enough? Probably not. But what needs to happen to stop this in the future is the FCA must be given the power to name and shame those that made the decision and ban them from working in that area of banking again.

Some days are better than others in this line of work. Some days are spent on endless and frustrating telephone calls to banks and insurers, trying to further client cases.

And then there are days like today. A client called to say his redress cheque had arrived and rather than be boring and pay off the credit card, he and his wife had decided to treat their kids to a holiday of a lifetime this summer in Disneyland. Many of their children’s friends had been and, of course, their kids had begged them to go.  Very hard for a parent to always have to say no to such things. But no longer – they will be on their way in August.

Days like this make all the hassles worthwhile.

Very sad to hear of the news of Charles Kennedy’s death today. He always struck me as a very decent man with the best interests of his constituents at heart. I never got the impression that he was in politics for himself or what he could get out of it. Telling that he was not caught up in the expenses scandal. A sad loss to his party and the country and thoughts go out to his family today.

Increasingly, it looks like David Cameron is going to ask the EU for very little in his negotiation. Setting the bar so low will enable him to claim he’s won all his “red lines” and the country should therefore vote to stay in the EU.

The pity is that Mr Cameron is in a much stronger position than he seems to think. He could demand so much more. The EU is terrified of the consequences of losing a minow like Greece. Think of the turmoil if the second biggest economy and second biggest net contributor walked away. It is unthinkable the EU would permit it. We can pretty much write the terms of the deal we want, so strong is the bargaining position. We have an historic opportunity to re-work the EU and re-focus it – moving it away from what it has always done first and foremost – protect French peasant farmers. That is a policy that belongs to the 1950s when it was conceived, not to the next 100 years. We need to compete with Asia, China, India etc in the next century. Mr Cameron knows it and if he grasp the nettle, he can set the EU on course to do it.