The Mis-selling of FSAVC Pension Plans: Did it happen to you and how to put it right.

by | Jul 1, 2024 | Doctor and NHS Pensions, Pension Advice

For more than 20 years, I have investigated numerous mis-selling scandals and helped very many people recover financially. But one little known pension product has never received the publicity it deserves, despite being mis-sold in its tens of thousands, often to some of the most valuable and dedicated professionals in our country: doctors and teachers.

The product goes by the long winded title of “The Free-Standing Additional Voluntary Contribution Pension Plan” or FSAVC for short.

What are FSAVC Pension Plans?

Despite the cumbersome title, FSAVCs have a simple purpose: they were designed to help employees build up extra benefits on top of their employer’s pension scheme. Most people don’t accrue anywhere near the maximum pension and lump sum that they could, so FSAVCs are intended to help bridge the gap to a secure retirement. Monthly premiums are paid into an investment fund and, at retirement, the accrued pot will provide extra benefits to boost the workplace pension.

 

Why FSAVCs failed to deliver?

FSAVCs were sold on the promise that increased control of the investment strategy would lead to higher returns compared to buying extra service in an employer’s pension scheme. But as usually happens in financial services, firms failed to deliver on their promises. FSAVCs were sold on the back of illustrations showing investment growth between 8.5% and 13% a year. None have got anywhere close to these returns. In reality, many FSAVCs will not even return the premiums invested.

Why? Simply because the very large charges levied on FSAVCs to pay for the administration, the fund management fees, the insurers profit and the salesman’s commission, left very little spare to deliver the investment returns promised.

Why FSAVC mis-selling happened?

In short, it was in the interests of the big insurers and banks and their financial advisers. The profits and commissions from steering people away from employer schemes were so large, it was almost inevitable the industry would recommend FSAVCs in the majority of instances.

Who are the main victims of FSAVC mis-selling?

I have worked with people from all sorts of industries and backgrounds, so quite literally anyone sold this type of product should have it investigated.

But the great majority of sales were made to public sector professionals, such as doctors, dentists and teachers. Why? Because salesmen were trained to find such people, as they typically stay in the same profession for many years. And if someone’s employment is stable, once sold a pension product they are likely to keep paying into it for a long period of time. As each premium paid generates a fee for the insurance company administering the policy and a commission for the salesman that sold it, such long term business is incredibly profitable.

How can you recognise the signs of mis-selling?

The same breaches of the regulatory selling rules crop up time and again in sales literature. Here are just a few of the common signs of mis-selling:

  • Not being fairly advised of the pros and cons of all available options
  • Being told an FSAVC was the only option
  • Not having the investment risks explained fully
  • Not being told about all the charges that would be levied on an FSAVC

What can you do if you suspect you were mis-sold an FSAVC?

It is never too late to get your retirement back on track (even if you are in retirement now). It is possible to prove mis-selling and be compensated accordingly. That compensation should be of an amount to put you back in the position you would have been in if you had taken the better option of paying extra into your employer’s pension scheme.

What if you have not kept any paperwork from the time of sale?

Please don’t think this means nothing can be done. Most insurers and banks have archives that go back many years. 9 times of 10, I do find the original sales paperwork there. So long as you can remember the name of the company that administered your FSAVC policy, I can do the rest.

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, you are not alone and you must not feel it was your fault.  Many people have challenged the advice they were given and been duly compensated. It’s crucial to seek advice and guidance to address the impact of mis-selling on your retirement savings. I set up Greg Vaughan Financial Services and Pension Claims with the sole aim of helping people do just that. Please feel free to get in touch for a free, no obligation, assessment of your FSAVC sale.

How much compensation might you be owed?

It is a bit of a cliché to say every case is different, and whilst that is true, there are definite patterns that can give a guide to how much compensation might be payable. The longer you paid into the policy is an important factor. Under performance happens slowly but surely over time, so if you paid in for 10 years it is likely your compensation will be larger than for someone that paid in for 5 years.

Similarly, the amount you paid each month will also be important. The higher your premium, the bigger will have been the charges extracted, and thus the more significant the under-performance.

All compensation calculations are carried out in accordance with complex formulas designed by the Financial Conduct Authority (the industry regulator). As there is more than one formula, it is very important indeed to ensure the correct one is used for your case. Over and over again, I have to challenge insurance companies and banks that are intent on using a formula that will give the lowest amount of compensation, rather than the right amount. Although highly unethical, this is not surprising when compensation can run into tens of thousands of pounds.

I have represented many people made a low initial offer which, on successfully persuading the firm to use a different formula, has increased many times over. Just as an example, a teacher client was originally offered £1,868, but a recalculation on a different basis led to compensation of £36,496.

One of my most important tasks, therefore, is to make absolutely sure the correct calculation formula is used in order to maximise your compensation.

Find out more: FSAVC mis-selling pension plans

 

View our highest and average claims against some of these FSAVC providers

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