Ex-Miners You May Have A Mis-sold Pension
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Were you a member of the Mineworkers’ Pensions Scheme (‘MPS’)?
If you are an ex-miner and were a member of the MPS and you were advised to transfer out of the MPS to a new pension scheme, you might have been mis-sold your pension. Head of Jordans Solicitors Horsforth Branch and Professional Negligence Solicitor, Chris Thomson, answers some common FAQs about ex-miners who may have been mis-sold their pensions.
What is the Mineworkers’ Pension Scheme (‘MPS’)?
First introduced in 1952, the Mineworkers’ Pension Scheme was a pension scheme for coal miners, to ensure they received a good pension after years of hard work in the coal mines. The rules of the scheme set out certain benefits payable to the members and prior to April 1975, members paid a flat-rate contribution of up to 20p per week.
After 1975, the contributions paid by the members and the benefits received were both linked to members’ salaries, which resulted in much higher contributions being paid by the members and in turn, higher benefits being received. The contributions paid by a member did not cover the full cost of providing the benefits, so British Coal paid the remaining balance of the cost of the benefits.
Around the late 1980s and 1990s, many occupational pension schemes like the MPS found that their investments had performed much better than expected and they had surplus amounts of funding. These surpluses were used to give MPS members additional benefits and to reduce the level of contributions paid by British Coal.
At the end of 1994, following privatisation, the Government took over the role as guarantor for the MPS from British Coal. Arrangements were subsequently put in place whereby the Government guaranteed that the members of the MPS would always receive the benefits they had earned up to that date and that, in future, those benefits would rise annually in line with inflation.
In 2017, the surplus fund the MPS had accumulated was valued in excess of £1.2 Billion.
What type of Occupational Pensions exist in the UK?
Occupational pensions in the UK fall into two main categories:
1. Defined Benefit Scheme – This is where payments are made by both the employer and employee into a tax-free pension scheme. When the employee retires, they usually receive a lump sum and an on-going monthly pension payment. These are commonly known as ‘Final Salary’ Schemes. The MPS is usually a Defined Benefit Scheme.
2. Defined Contribution Scheme – This is where payments are made by both the employer and employee into a scheme or ‘pension pot’ and upon retirement, the employee can purchase an ‘annuity’ to provide an income for life, or they can withdraw the pension pot to provide for their retirement. These types of pensions can be in the form of personal pensions, group pensions, self-investment pensions (‘SIPPs), funded unapproved retirement benefit schemes (‘FURBS’), unfunded unapproved retirement benefit schemes (UURBS) etc.
What are the benefits of having a MPS pension?
Most MPS pensions offer the following benefits:
• They promise a guaranteed income on retirement
• They are secure and protected up to 90% of the value by the Pension Protection Fund
• They are indexed linked and increase with inflation
• They pay for the whole of the miner’s retirement
• They offer a Death in Service Benefit to the miner’s spouse
• They can include a Tax-free Draw Down available at a certain age or if suffering ill-health
So considering the generous benefits the MPS provides, securing a private pension that offers similar benefits on today’s market would be ‘as rare as hen’s teeth’.
Despite the MPS benefits, many ex-miners have transferred out of the MPS to different pension schemes which often have far less benefits, are not as profitable and in many cases are as a result of pension mis-selling.
What is Pension Mis-selling?
Pension mis-selling usually takes place when an advisor (whether negligently or intentionally), incorrectly advises an individual to become a member of a pension scheme or to transfer their existing accrued benefit to a new pension scheme that is not suitable for the individual.
The most common mis-selling tends to be where an individual is advised to transfer from a company ‘defined benefit scheme’ (e.g. the MPS) to a ‘defined contribution personal pension scheme’.
Why did so many miners transfer out of the MPS in the late 1980’s?
The Personal Pension Provisions of the Social Security Act 1986 came into force in 1988 and provided more flexibility for workers to save for retirement themselves and for the first time it enabled workers to transfer the benefits they held in company pension schemes to personal pension schemes.
Unsurprisingly, the 1988 provisions led to many coal miners being contacted by independent financial advisors and commission led sales teams on behalf of the banks, advising the miners to transfer their pensions away from the MPS to “better pensions” with promises of “higher returns” for riskier investments.
More than five million personal pensions were sold between 1988 and 1994.
Whilst the advisors and sales teams netted thousands in transfer fees, many coal miners did not receive the appropriate advice prior to transferring their pensions and in many cases were left with far less beneficial pensions than their original MPS pensions.
What happened during the Pension Review in 1994?
By the early 1990’s it had become clear that serious mis-selling was taking place in the pension market and in 1994 the Financial Services Authority requested a review of all personal pension policies sold between 29 April 1988 and 30 June 1994.
Under the review, if it was found that the advice to transfer away from the original pension scheme was based on negligent advice, compensation was provided, with a view to placing the individual back in the position they would have been in, had they not received the negligent advice.
Unfortunately not all of the 1.5 to 2 million “defined benefit pension” transfers were investigated, and therefore those who missed out on their pension being reviewed may still be entitled to substantial compensation.
Does Pension Mis-selling still occur?
Sadly yes. Over the years, tighter regulations have been placed on advisors who provide pension advice, however this has not stopped wide spread pension mis-selling with some advisors still recommending pensions based on the commission they would receive as opposed to whether the pension will actually benefit the individual. Unfortunately this problem has not gone away.
In 2015, the then Chancellor, George Osborne introduced the Pension Freedom Initiative. Mr Osborne said pensioners would have “complete freedom to draw down as much or as little of their pension pot as they want, any time they want” and “No caps. No drawdown limits. Let me be clear, no-one will have to buy an annuity…”
This inevitably led to a multitude of transfers from company pension schemes into personal pension schemes due to the apparent flexibility of the personal pension scheme, however once again, many transfers have been based on negligent advice by a commission and fee led industry.
The Financial Conduct Authority estimates that mis-selling in this form is costing individuals a combined £2 billion each year.
How much could I be due in compensation?
If it can be established that you should have remained with the MPS as opposed to the pension you were advised to take out and that you were negligently advised, you could be owed the amount you would have received had you remained with the MPS and not transferred to the new pension scheme. In many cases this can amount to many tens of thousands of pounds.
The Financial Ombudsman Service (‘FOS’) can award up to £160,000 to individuals who bring a complaint about mis-selling that occurred before 1st April 2019. If the mis-selling complaint occurred after 1st April 2019, FOS can award a maximum of £350,000.
If the advisor or company who negligently sold the mortgage are no longer trading or in existence, a complaint can be made to the Financial Services Compensation Scheme (‘FSCS’) but only up to a maximum of £50,000.
If your claim is pursued via the courts at common law, there is no maximum limit on damages claimed.
Do time limits apply to my claim?
Yes and it is imperative that you act fast to avoid being out of time to make a claim.
Generally, to bring a claim against a Professional for breach of contract, a person has 6 years from the date of the original Professional’s breach of contract. To bring a claim against a Professional for negligence, a person has 6 years from the date that the Professional’s breach of duty led to the person suffering a loss. Calculating when the breach of contract occurred or when the loss arising from the breach of duty occurred is not necessarily simple.
In negligence claims, a person bringing the claim usually also has the benefit of a three year limitation period. This period of three years starts from the date the person acquired knowledge relevant to their original claim which should have prompted the person to make further reasonable enquiries. Determining whether a person has acquired the appropriate relevant knowledge can be very difficult.
In many cases, the three year period will expire before the end of the 6 year period referred to above. This is because the person acquires the appropriate knowledge relevant to their original claim very soon after the original claim concludes.
However, it is possible that the person bringing the claim acquires the knowledge relevant to the original claim some years later, and in those circumstances, the three year period may act as an extension beyond the initial 6 year limitation period. This only applies in certain limited circumstances. You should not rely on it without taking advice. Even if it does apply, the absolute maximum amount of time a person has to bring a claim is 15 years from the date of the original professional’s breach of duty, and again, calculating this date is not necessarily simple.
Do the time limits for the 1994 Pension Review apply to my claim?
The 1994 “Pension Review” looked at sales of personal pension policies between 29 April 1988 and 30 June 1994.
If an individual wanted their pension policy to be considered as part of the Pension Review, they had to apply before the deadline of 31 March 2000.
However, if the sale of a personal pension was not included in the Pensions Review, for example, because the individual did not receive an invitation or because they bought their policy after June 1994, FOS have confirmed they may still be able to consider a complaint about the advice received. In addition, if you think there was something wrong with the review of your pension transfer or you think you should have been included but you were not, FOS have confirmed they may still consider your claim.
If FOS have already considered your pension transfer under the Pension Review, it is unlikely that FOS will consider it again.
What if the Pension Advisor who advised me is no longer trading?
If the advisor is no longer trading or in existence, it may be possible to submit your claim to the FSCS to consider, as a compensator of last resort.
How long will my claim take?
This will depend on a variety of factors, such as whether the advisor who sold you the pension is still trading, what paperwork you possess and how long it takes to obtain the evidence to enable your claim to be investigated and pursued. Additional factors will be how the advisor responds to the complaint and if the matter is required to be referred onto the FOS or the FSCS, or alternatively if pursued through the courts at common law.
If your opponent accepts liability from the outset for the negligent pension advice, or if they are no longer trading and the complaint is referred to the FSCS, the matter could be resolved within 3-6 months.
If the advisor denies liability and the matter has to be referred to FOS to investigate, the matter could be resolved in 6-18 months.
If you have to pursue the claim via the courts at common law (after exhausting the FOS or FSCS route) the matter could be resolved within 12-24 months.
Why should I use Jordans Solicitors to make my claim?
Whilst you can pursue a claim on your own and the process to complain may appear deceptively straight forward, our specialist team at Jordans Solicitors will provide you with expert input from the outset and we will navigate the process on your behalf.
Should it be necessary to pursue your claim via the courts at common law, our specialist team at Jordans Solicitors have been pursuing professional negligence claims against Defendants through the courts for a considerable number of years, with great success. This may involve ensuring claims are issued and served correctly, obtaining and organising expert evidence, considering appeals, ensuring court time limits are strictly adhered to, arranging and obtaining insurance…all of which can feel like a minefield for those not experienced in pursing such claims.
Rest assured, if you instruct Jordans Solicitors to pursue your claim, we will investigate and where possible, strive to recovery the full amount of compensation you are entitled to.
How will my claim be funded?
We may be able to offer you a ‘no-win-no-fee’ agreement.
We charge a fixed fee of 25% including VAT in the event that your claim is successful.
How do I start my claim?
Please complete your details in the ‘Request A Call Back’ enquiry form at the bottom of this page, and one of our specialist advisors will contact you to investigate your claim.
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