I’ve lost £277k for my retirement after being tricked into huge pension mistake – I thought my money was in safe hands

WHEN Dot Russell had a meeting with a financial adviser, she thought she was putting her cash in safe hands.

In reality, she was making a mistake that would cost her £277,000 in retirement.

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Dot, from Whitburn, West Lothian, had originally searched online for a mortgage broker.

She needed help converting her interest-only mortgage to a repayment mortgage, and found a man online who offered to visit her at her home.

During their meeting, he asked her what pensions she had, telling her he was also a qualified pension adviser.

Dot, 55, had a defined benefit pension, which provides a guaranteed income for life, through her job at the local council, where she had worked for 34 years.

The adviser immediately said she should transfer out of this pension and take a cash lump sum of £272,000.

Fast-forward ten years and Dot has now discovered she was one of thousands of savers who have lost out following shoddy advice to give up their guaranteed pensions.

The firm that advised her, Capital & Income Solutions, has more than 1,000 victims alone.

It turned out the man she spoke to was not qualified to give pension advice.

He acted as an “introducer” for the firm, which has now gone bust, leaving behind a £44million compensation bill.

“He played on my financial naivety and trust that he was qualified, and made me feel I’d be silly not to take advantage of this opportunity,” Dot says.

“The whole thing is deeply upsetting and I’m full of regret.”

Here we take a closer look at pensions and what you should do if you think you have been badly advised  . . . 

WHY YOU SHOULD NOT DITCH DEFINED BENEFIT SCHEMES

DEFINED benefit or final salary pension schemes provide savers with a fixed income for life.

These gold-plated pensions are typically more generous than modern workplace pensions, where workers build up a fund.

The guaranteed income means they offer protection against soaring inflation and are sheltered from bumps in the stock market.

Watchdog the Financial Conduct Authority has repeatedly warned that giving up these pensions is not in most savers’ best interests.

By giving up these pensions and taking the cash, many savers will lose out because the guaranteed income they would have received over time would have been higher.

In Dot’s case, the Financial Services Compensation Scheme, which steps in when financial firms go bust, has estimated she is £277,000 worse off following the advice to shift her savings.

She received £85,000 in compensation from the FSCS, which is the maximum it can pay out.

Many savers have also lost huge sums after being convinced to move money into sham investments.

HEFTY BILL

SO far, 1,082 victims have claimed compensation from the FSCS for advice given by Capital & Income Solutions.

The FSCS says almost all the claims against the Leeds-based firm were related to poor pension transfer advice.

The firm advised savers to transfer their pensions because, by signing off these transfers, it could charge them a hefty five per cent fee.

This usually amounted to thousands of pounds per customer.

In some cases, victims were advised to then transfer their pensions to a different provider for another five per cent fee — this is known as “churning”.

The FSCS added that a large number of the firms’ victims were former British Steel Pension Scheme workers.

The BSPS was the subject of a scandal that saw around 4,000 steelworkers wrongly advised to transfer their pensions.

Capital & Income Solutions also targeted workers at other large organisations that had generous defined benefit pensions, such as local government and Land Rover.

The FSCS told Sun Money that, so far, 314 victims of Capital & Income Solutions have been paid the maximum amount of compensation, but their actual losses are far higher.

DEVASTATING LOSSES

ENGINEER Brian Wells, from the West Midlands, worked for Land Rover for 39 years.

At 59, he was starting to think ahead to his retirement at 65 when he unexpectedly received a large valuation for his guaranteed pension.

This is the amount the company would pay him as a lump sum to give up his pension benefits.

Confused about which option was best, he went online and found Capital & Income Solutions, which said it could help him make the right choice for his money.

After just one conversation, Capital & Income Solutions encouraged Brian to leave the scheme and take a cash sum.

The adviser claimed to be a “Government-accredited pension transfer specialist” and said pension transfer values were at an “all-time high”, suggesting that by not transferring, Brian could lose out.

Brian paid the adviser £12,817 in fees to transfer his pension — a mistake that is estimated to have cost him £385,000.

“I didn’t understand what I was doing. I entirely trusted the advice I was given,” Brian says.

“The scale of what I’ve lost is devastating.”

Brian received just 22 per cent of his total losses back through the FSCS.

CLAIMING COMPENSATION

CAPITAL & Income Solutions is just one of dozens of firms that have given poor pension transfer advice and gone bust.

If you think you received bad advice to transfer out your guaranteed pension, you can make a complaint to the Financial Ombudsman Service.

To start a complaint, visit financial-ombudsman.org.uk/make- complaint or call 0800 023 4567.

You will need details about the business, such as its name and address, as well as when your issue took place.

You must complain to the business first before you can take your case to the FOS.

If the firm you dealt with is no longer trading, you can make a claim with the FSCS instead.

Check if your firm has gone bust on the FSCS website.

To make a claim, visit fscs.org.uk/making-a-claim.

Claims are free and you do not need to use a claims management firm.

WHEN YOU SHOULD TRANSFER OUT

TRANSFERRING out of a defined benefit pension is not the best option for most savers.

However, there are some circumstances where it might be the right thing to do, such as if you have a serious health condition that could reduce your life expectancy.

This is because it is unlikely you will benefit from a guaranteed income for as long as other people.

It may also be beneficial to take the lump sum if your pension is very small and only pays a paltry amount each year.

You are required to seek financial advice if you want to transfer your defined benefit pension where the total value is more than £30,000.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “The benefits you receive from a defined benefit pension are hugely valuable and it rarely makes sense to transfer.

“You are getting a guaranteed income for life that rises each year and this brings enormous peace of mind.”

This post first appeared on thesun.co.uk