Savers in line for £150m pay-out over poor advice on pensions

PENSION savers could be in line to receive more than £150 million in compensation after being badly advised when they switched their pension funds, the City watchdog has ruled.

The Financial Services Authority (FSA) yesterday said that, despite previous warnings, its ongoing review of the pension-switching market found a number of firms continued to give their customers unsuitable advice.

It ordered several advisers to carry out reviews of previous advice, which could result in more than 150m being paid out in redress to customers.

Pension-switching advice is typically offered to people in company and private pensions. In recent years, there has been a growth in the number of companies seeking to cut pension costs by encouraging employees to switch out of final-salary pensions, which cost employers more to run.

The City regulator carried out a major review of pension switching advice two years ago, and subsequently wrote to more than 4,500 firms clarifying its advice standards. Since 2008, the FSA has investigated 22 firms which posed the highest risk of offering poor advice, with two firms fined almost 750,000.

Dan Waters, director of conduct risk at the FSA, said its actions would result in large sums of money returned to customers who received poor advice.

He added: "We remain concerned that some firms continue to give poor advice."

The investigation found that, in most cases of unsuitable advice, the customer had been switched into a product with higher costs without good reason.