Most mis-sold pension claims result in compensation between £25,000 and £75,000, depending on your provider, losses, and whether FSCS or FOS handles your case. Maximum payouts can exceed £430,000 in rare cases.

The compensation you can receive for a mis-sold pension varies significantly based on your individual circumstances and the financial losses you incurred. The primary goal of compensation is to return you to the financial position you would have been in had you not received unsuitable advice.

Here’s a breakdown of potential compensation amounts and the factors that influence them:

How Much Compensation Will I Get for Mis-Sold Pension?

Average Compensation:

• General estimates for pension mis-selling cases range around £25,000 for private pensions and £50,000 for final salary pensions.
• The Financial Services Compensation Scheme (FSCS) reports an average claim value of £74,945 for pension mis-selling cases they handle.
• Some services state they can secure “anywhere up to £50,000 of your pension nest egg”, while another has recovered “tens of millions” for victims and highlights the potential to reclaim “up to £150,000”. One client received £62,678.92 for a mis-sold investment into storage pods. Money Redress reported their highest payout for a customer as £384,005.02.

Maximum Compensation Limits:

If the financial adviser or firm is still trading, the Financial Ombudsman Service (FOS) can order compensation. Their maximum award is £430,000 (or £150,000 if the mistake happened before April 1, 2019). Another source indicates the FOS maximum award can be £445,000.

If the company responsible for the mis-sold pension has gone out of business, claims are handled by the Financial Services Compensation Scheme (FSCS). The FSCS has a compensation cap that depends on when the firm ceased trading:

• Up to £85,000 for firms that went out of business after April 1, 2019.
• Up to £50,000 for firms that went out of business between January 1, 2010, and March 31, 2019.
• Up to £48,000 for firms that went out of business before January 1, 2010.

It’s possible to seek additional compensation against any other regulated firm involved if your pension losses exceed the FSCS award limits.

Factors Influencing Compensation

The actual amount of compensation you receive is determined by several factors, including:

• Severity of Mis-selling and Financial Loss: The level of pension mis-selling and the extent of financial losses you incurred as a direct result. This includes capital losses and lost interest.
• Specific Circumstances: Your individual personal circumstances at the time the advice was given, and how the mis-selling affected you.
• Type of Pension and Investment: The size of your pension pot and the nature of the investments made.
• Unearned Interest and Lost Opportunities: Compensation can include unearned interest and the loss of investment opportunities you would have had with a suitable pension plan.
• Date of Mis-selling: How long ago the mis-selling took place. This is also relevant for FOS limits, which vary depending on when the advice was given or the product opened.
• Breaches by Advisor: The number of breaches made by the adviser or salesperson.
• Psychological Impact: In some rare cases, you may be able to claim additional compensation for psychological distress or conditions like post-traumatic stress disorder, particularly if the responsible firm is still in business.

Tax Implications of Compensation

Compensation payments for mis-sold pensions, specifically those resulting from negligence, breach of contract, breach of fiduciary obligation, or contravention of Section 62 of the Financial Services Act 1986, are specifically excluded from a charge to Capital Gains Tax and Income Tax under FA96/S148 (1) and (2).

However, this statutory exemption does not apply to cases where bad investment advice on pensions was received outside the period covered by the review. In such instances, compensation received directly from a financial adviser or insurance broker may still be subject to Capital Gains Tax.

Due to the complexity of pension claims, each case is different, and an expert assessment of your specific situation is crucial to determine your eligibility and the potential compensation amount.

Frequently Asked Questions About Mis-Sold Pension Compensation