The true cost of rogue pension advice has been revealed in data released by a consumer champion.
Savers have lost millions of pounds to rip-off advisers with a cavalier attitude to interpreting pension and investment rules.
They exploit outdated and complicated loopholes in the law to charge unwary savers sky-high fees and dump their cash in risky investments that are often doomed to fail or fronts for fraudsters.
Many victims are left without any redress for their losses, but thousands have claimed compensation from the Financial Services Compensation Scheme (FSCS).
The scheme says 18 people a day get in touch to seek help and three savers are paid the maximum compensation amount of £50,000 every day.
Wild West advice
But this is only the tip of the iceberg as the FSCS rejected around 1,500 complaints as out of time and reckons many victims are yet to find they have lost their savings or do not bother making a claim.
The revelations come against a backdrop of record amounts of cash being moved out of workplace pensions – with £34.2 billion switched last year and £18 billion transferred in the first six months of 2018.
Former pensions minister Baroness Altmann said: “It is not acceptable for people to be exposed to a ‘Wild West’ in financial advice, where they may unsuspectingly use an adviser who has just joined a new firm straight after walking away from compensation claims for advice that left a trail of destruction and loss for previous customers.
Call for tougher sanctions
“There needs to be a reliable record of names, qualifications and expertise of all independent financial advisers, with the ability to strike people off the register or place cautions next to their names that will reflect past problems.”
The FSCS protects savings, insurance, investments and mortgages.
Since the agency was formed in 2001, £26 billion compensation has been paid to 4.5 million people.
Pay-outs are subject to a maximum claim of up to £85,000 depending on the type of advice.
Consumers can access the service for free. Compensation and the cost of running the FSCS comes from a levy paid by financial providers and advisers.