The Financial Services Authority yesterday slapped a £175,000 fine on a financial adviser for duping customers into unlocking thousands of pounds from their pension funds, a move that put their retirement income at risk.
Berkeley Jacobs Financial Services has been forced to set aside £1m to cover compensation for about 5,000 customers who were the victims of misleading advertising and wrong advice. The firm only promoted the short-term benefits of withdrawing cash from pension funds before retirement, without explaining that the customer would be sacrificing their future pension income by doing so.
David Kenmir, director of investment firms at the FSA, said: "We will not tolerate firms showing such a blatant disregard for consumers' interests. The firm tried to unlock as much cash from the consumer's pension as possible, often much more than the consumer needed or wanted."
Savers can lose out on up to 80 per cent of the income they would have been entitled to by removing cash from their pension fund before they retire, according to the FSA. It says pension unlocking should only be carried out when the customer has an "overwhelming need" for cash. A number of other firms are also being investigated over similar issues after the FSA warned firms in January last year it would be cracking down on unscrupulous practices.
Berkeley Jacobs was found to have failed to ask customers what level of retirement income they needed, nor had it considered what annuity options would give the customer the best income.
After discovering these failings, the regulator met with resistance from Berkeley Jacobs. Co-operation to address the issues only took place after the FSA went to the board of IFG, which bought the firm in 2000. The original management of Berkeley Jacobs no longer have any involvement with the firm.Reuse content