FSAVC Mis-selling: Did it Happen to You and How to Recover Financially.
Over the past 20 years, I have investigated one pensions mis-selling scandal after another. But one area has often been over-looked by the media and regulators alike: the mis-selling of Free-Standing Additional Voluntary Contribution Pension Plans (or FSAVCs for short).
What are FSAVC Pension Plans?
FSAVCs were designed to help employees (typically in the public sector, like doctors and teachers) top-up the benefits from their employer’s pension scheme. Monthly premiums are paid into an investment fund and, at retirement, the accrued pot will provide extra benefits to boost the workplace pension.
Why FSAVC Pension Plans did not live up to the hype
As is usual in financial services, firms over-promised and under-delivered. FSAVCs were sold with the promise of investment growth between 8.5% and 13% a year. In reality, many FSAVCs will not even return the premiums invested.
The main reason is the very large charges that the insurers and banks secretly take out of FSAVC funds to pay for their administration costs, their profit and, of course, the huge commissions paid to financial advisers to encourage them to sell.
How did FSAVC mis-selling happen?
In no small part, it was the size of the profits and the commissons that inevitably led the industry to act unethically; selling their own policies when knowing alternatives would be more in their customers’ interests.
Who are the main victims of FSAVC mis-selling?
I have represented clients from many different professions, both in the private and public sector. It is fair to say though that the majority of sales were to public sector professionals, such as doctors and teachers. The reason? Salesmen knew that such people typically work in the public sector for many years, meaning they would be likely to pay into the FSAVC over a long period of time. Each premium paid generates a commission payment for the adviser and his firm, so such long-term business was (and remains) extremely profitable for them.
How can you spot the signs of mis-selling?
The regulatory selling rules set out how advisers should sell FSAVC pension plans. Company schemes were often better value and so rules were in place to make sure customers did not pay into FSAVCs when it would clearly not be in their interests to do so. But the industry often ignored the rules and thus the same breaches can be seen time and time again in sales literature. Below is a short list of the common reasons why FSAVC mis-selling occurred:
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Advisers not explaining in an unbiased way about all available options
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Not being told about the punitive tax charges that can apply if paying too much into an FSAVC.
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Being advised to invest in speculative investment funds
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Not being told about all the charges that would be levied on an FSAVC
What can you do if you believe your FSAVC was mis-sold?
The important point to keep in mind is that you can contest advice that was given many years ago. If compensation is awarded, it should be aimed at putting you back in the position you would have been in if you had taken the better option of paying more into your employer’s pension scheme.
What if you have no paperwork from the time of advice?
Please don’t let this deter you. Do contact me, even if you can only remember the name of the insurance company that administered your FSAVC policy. I should be able to find your policy and all the sales paperwork in the firm’s archives. This will enable me to analyse the sale for you, build a mis-selling case if you were given unsuitable advice and win compensation.
How to find out if you are owed compensation and how to claim it?
If you suspect you were a victim of FSAVC mis-selling, please do not feel it was your fault. Many unsuspecting people, sold such plans years ago, have successfully challenged the advice they were given and been fully compensated. I started Greg Vaughan Financial Services with the main aim of helping people do just that . Please do get in touch today for a free, no obligation, assessment of your FSAVC sale. I will do my very best to win compensation for you if mis-selling occurred.
How much compensation might you be owed?
Every case is different because no two people will have exactly the same financial circumstances. The amount of compensation due will therefore vary from person to person.
The Financial Conduct Authority (the financial services industry regulator) has designed a number of formulas for calculating compensation. They can produce quite wide differences in amounts of compensation, so it is absolutely crucial to ensure any compensation is calculated using the most appropriate formula for the individual concerned. Time and again I see insurance companies and banks trying to get away with using a formula that gives the lowest amount of compensation, rather than the right amount of compensation. This is not too surprising (albeit unethical) when amounts can range from a few thousand to tens of thousands of pounds.
One of my most important tasks therefore is to maximise your compensation by ensuring the correct calculation formula is used. I have represented many clients made a low initial offer which, on successfully challenging the formula used, has increased tenfold or more on recalculation. For example, a recent case for Mr O had an initial offer of £1,868.93. He was quite keen to accept, but I persuaded the Financial Ombudsman to order the insurer to recalculate on a different basis, and we settled at £36,496.84.
So the amounts of compensation can be very significant indeed, if not in fact life changing for some people, so I will always do my very best to maximise it. Here are some examples of the amounts of compensation awarded to clients in recent years: (click for evidence); (click for evidence); (click for evidence); (click for evidence); (click for evidence); (click for evidence); (click for evidence); (click for evidence); (click for evidence)
Mis-selling case study 1 – FSAVC Mis-selling to Doctors
I have conducted very many FSAVC mis-selling investigations since starting out helping victims in 2004. Here’s a couple of typical examples: one for a doctor and one for a teacher (people often targetting by FSAVC salesmen).
Dr H contacted, having heard from colleagues about the possibe mis-selling FSAVCs. He had been targetted in the mid 1990s by a firm of IFAs (independent financial advisers) that claimed to specialise in advising medical and dental professionals. They had built up a large book of such clients over more than 10 years, making a small fortune in commission from pension and investment sales.
I obtained the paperwork for the sale and identified a number of breaches of the regulatory selling rules, committed in order to persuade Dr H to sign up for an FSAVC, rather than buy “added years” of service in the NHS Pension Scheme.
Unfortunately, the IFA firm had long disappeared and no-one connected to it could be traced. In such circumstances, the Financial Services Compensation Scheme may be able to consider if the firm acted against Dr H’s interests and compensate him if so. Sadly, not everyone is covered by the FSCS scheme, but I was able to persuade them of the validity of Dr H’s case.
It took over a year to fully investigate his case and obtain compensation of over £40,000 for the mis-selling that had clearly taken place.
Mis-selling case study 2 – FSAVC Mis-selling to Teachers
Mr B contacted me following comments from a teaching colleague. His colleague had doubts about his own FSAVC sale and the two colleagues together called me to discuss the advice they had been given by the same insurance company.
The salesman for this particular firm was well known to teachers locally and visited schools on a number of occasions to host seminars and presentations on pensions.
Having obtained the sales paperwork, I saw the same sales techniques were evident time and again.
Presenting the evidence of bad practice to the insurance company that employed the salesman resulted in every case being upheld and compensation paid out, typically running into thousands of pounds per person.
How to get in touch…
I’m here to help, so please don’t hesitate to contact me
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