Ambulance chasers move from PPI to pensions

‘No win, no fee’ firms are lying in wait for savers who gave up their final salary pensions for cash, reports Sam Brodbeck

Claims management firms have got their sights on the hundreds of thousands of people who have cashed in “final salary” pensions over the past two years. Record sums have been pulled out of company schemes by savers attracted by huge “cash transfer values” and other perks available only with personal pension plans. Official figures show that transfers hit £10.6bn in the first three months of the year, the highest on record.

Now the head of a governmentbacked pensions helpline has warned that so-called ambulance chasers – firms that offer to help consumers with compensation claims – are charging thousands of pounds to people who think they were wrongly advised to ditch their pensions.

Michelle Cracknell, chief executive of the Pensions Advisory Service, told Telegraph Money there had been a marked increase in telephone inquiries from savers who were suspicious after receiving cold calls and text messages about transferred pensions.

She pointed to one case where a saver had been awarded £36,000 in compensation after proving he should not have been advised to transfer. The claims management firm charged him £6,000 when he could simply have used the ombudsman’s free arbitration service.

She said: “There’s nothing to stop individuals pursuing things themselves. If you have taken advice the first thing is to go back to the adviser and give them the right to defend themselves. Then you should go to the ombudsman. At the moment many people who have transferred will be rubbing their hands at the size of the pensions they’ve been able to cash in. But if in a couple of years there’s a market downturn and those same people look at their statements and it’s not what they were expecting, that’s when the complaints could come.

“It could take a number of years to work its way through the system. And that’s why claims management companies ring people up – they’re trying to stir them into action.”

Ms Cracknell herself received an unsolicited text message from one firm, which she believed targeted her because she had been writing about pensions on her Facebook account.

Under government rules, you must take regulated financial advice if you cash in a pension worth £30,000 or more. That can equate to a pension income of just £1,000 a year. The adviser must hold specialist qualifications, meaning the work can easily cost thousands of pounds.

The City watchdog has shut down numerous advice firms after fears that advisers – who are often paid only when a transfer goes through – were too eager to help people give up goldplated pensions.

Transfers out of such schemes are irreversible, and it becomes the responsibility of the individual rather than their employer to ensure there is enough money to live on in retirement.

In research conducted last year into 88 cases where an adviser recommended a transfer, the regulator agreed with that advice less than half of the time.

Robert Reid, a senior adviser at Syndaxi Financial Planners, said claims management firms were moving into pensions and investments now that the end is in sight for the PPI scandal. Banks have paid out billions to customers, many of whom unnecessarily used third parties to make claims, after mis-selling payment protection insurance.

But after August 2019 banks will no longer have to pay PPI compensation – leaving claims management firms looking for new sources of revenue.

Mr Reid said that because of the complex nature of pension transfers he doubted that many claims