Understanding and explaining pension terminology
You need to understand the basics how your pension works. This will ensure your future financial affairs are in order. It will help you spot the scams, and protect you in the event you are investing in the wrong product. It is important for you to ensure you have received suitable financial advice in the past and for the future, and for you to discover whether you have been mis-sold a pension previously for which you can seek compensation.
WHAT IS GLOSSARY OF TERMINOLOGY FOR?
As the system is quite complicated, we will try to simply it by explaining some of the main words and phrases.
Remember, that by complicating matters the rogues and negligent financial advisers prey on the innocent pension investors. The general public simply don’t understand what they’re being advised and sold .
With a complex financial services industry, learning the terminology will help you to understand your pension better so here’s a short glossary of terms.
TYPES OF PENSION
A pension is a savings account, made available on retirement or at a certain age and usually paid in instalments.
Also known as a “Preserved Pension”, a frozen pension is one that is 1. no longer being paid into, or 2. is no longer increasing in value.An example of this would be an occupational pension where the employee has left the business.
The State Pension is available to be claimed once an individual reaches State Pension Age. The amount received depends on various factors, such as the time you reach state pension age, or how many years you have paid contributions.
Or “Workplace pension”. Occupational Pensions are set up by your employer and generally take a percentage from your wages in order to save for a pension. There are many different types of occupational pension, and it is now law for all employers to provide them.
Defined contribution or “money purchase” pensions can be through work or created by you. How much you receive on retirement depends on how much money you paid into the scheme, and how much money it has made in interest or returns.
Defined benefit pensions are generally “Final Salary” pensions. Generally this a form of occupational pension, where what you receive on retirement depends on how much your earned during your career, as opposed to defined contribution where it depends on how much you contributed. These pensions tend to keep up with inflation and are paid in proportion to the career salary. Defined Benefit pensions are generally regarded as some of the best usually held by Teachers, Doctors and NHS staff, Government employees
and other professionals employed by government. Be aware that these are some of the most commonly mis-sold pensions.
Final Salary Pension
Final Salary Pensions are a type of defined benefit pension where how much you receive in retirement is determined by how much you were earning in your last few years of work, granting those with high-achieving careers a generally healthy pension-pot in retirement.
A career average pension is a type of defined benefit, often occupational pension. How much you receive in retirement depends on the average salary your received throughout your career. Now more common than Final Salary pensions.
Added Voluntary Contributions – AVCs are a way to top up your final salary or career average salary pension. Rather than accepting the normal amount of pension, pension holders can make extra contributions to the pot for a greater amount in retirement.
A SIPP is a Self-Invested Personal Pension. This is a tax efficient vehicle for investments. Transferring a pension to a SIPP effectively permits you to become your own pension fund manager. Mendelsons Solicitors specialize in compensation claims for mis-sold SIPPs.
A Small Self-Administrated Scheme. This is similar to a SIPP, as a SSAS allows you control of your pensions investments. Often used by the self- employed people.
Master Trust Pension
These pensions include schemes like NEST, NOW and the People’s Pension, usually set up by a provider for occupational pensions.
The Financial Ombudsman Service is another government commissioned independent body. It’s role is to settle disputes between clients and companies offering financial services. It has the power to force companies to pay compensation if it finds them at fault of the FCA’s rules and regulations. Mendelsons Solicitors takes claims to the Ombudsman when firms are still operating.
Group Personal Pensions are a type of occupational pension through an employer. Control of the investments involved goes to the employer and pension provider.
The Financial Conduct Authority is the financial services regulator in the UK. It determines the permissions and mode of operation for all regulated financial advisers, pension providers and regulated investments. They are commissioned by the government as an independent body and are the ultimate source of authority in the financial sector. They keep a public register of regulated firms and individuals.
The Financial Services Compensation Scheme takes its powers from the FCA, but acts independently. All regulated firms pay into an FSCS Levy, which pays out compensation when things go wrong and the "guilty party" is insolvent. Mendelsons Solicitors submit claims to the FSCS on behalf of clients who have been mis-sold pensions and suffered losses.
The pension provider is the business who actually holds your pension account and administers it for you, sends you correspondence to update you on the state of the pension In many cases, this is a SIPP or SSAS provider.
An Independent Financial Adviser. This is an individual or business that is regulated by the FCA to provide financial advice. It’s the IFA’s job is to ensure that your investments are suitable for your pension, and that it’s in your best interests.
A regulated investment is one that benefits from the oversight of the FCA. Generally these are low to medium risk investments and come with matching returns. They include managed funds, conducted by experts who invest your pension in safer options. If they fail, you can claim compensation from the FSCS or if they are negligently managed you can receive a ruling from the FOS.
The person taking out the pension, taking advice from an IFA and the beneficiary of the pension.
A UCIS is an Unregulated Collective Investment Scheme. Many people invest their pensions in UCISs’. They are not regulated by the FCA and therefore considered high-risk, with no compensation from the FOS or FSCS if they fail unless there is a regulated IFA or SIPP provider who is considered to have given advice. Most UCISs are mis-sold because the investment is not suitable for the retail client and they were not aware they were going to invest into an unregulated scheme.
Non Standard Product
UCIS and Unregulated Investment. These can include: Forestry, wine,overseas property, carbon credits, fuels, unlisted shares, parking spaces, storage pods and more.
Suitability for a pension is determined by a number of factors, including wealth, attitude to risk, capacity for loss and level of investor knowledge. Failure of an IFA to check this could result in compensation for the retail client if they receive unsuitable advice and suffer a loss.
High Net Worth Individual
An important part of suitability – defined as somebody who earns over £100k per year or has £250k of investable assets needed to invest in a UCIS.
Letter of Authority
LOA stands for letter of authority – signing one of these for a company entitles them to act on your behalf regarding your pension.
Hopefully you can now recognise your own pension situation form the above and if you now believe that your pension investments may have been mis-sold to you, please get in touch for a free consultation using the form attached.
A Sophisticated Investor
Either self-certified or by somebody else, a sophisticated investor has the knowledge and experience needed to manage unregulated investments.
WHY CHOOSE MENDELSONS?
Here at Mendelsons Solicitors, we understand what you’re going through and we are passionate
about helping you access the maximum compensation to assist with your recovery. We also
understand that making a claim can be daunting which is why we support you through the claim. We
will do most of the work for you and ensure that it remains as stress-free as possible.
For advice in relation to bringing a medical negligence claim, call Steven Mendelson today, on 0161 241 1661 email us at firstname.lastname@example.org or complete our online enquiry form and we will call
you. We will then discuss your case with you and explain the next steps for you to take.