Have you been mis-sold a Self-Invested Personal Pension?
With a much wider investment choice than a traditional private pension scheme, a Self-Invested Personal Pension (SIPP) can offer flexibility with investments.
They allow people to invest in commercial property, stocks and shares on HMRC recognised UK or overseas stock exchanges, unit or investment trusts, cash deposits or even gold bullion.
Individuals can transfer pension savings accrued in different types of pension fund into their SIPP, which have tended to be established by experienced investors, comfortable with taking their own investment decisions.
Often used by those who want to actively manage their own fund by dealing with and switching their investments, it has been common for business owners, for example, to own their business premises in a SIPP and lease them to the business. The clue is in the name - Self-Invested.
In practice therefore, a SIPP is a pension wrapper that acts like a container for holding one or more investments until an individual retires and starts to draw a pension income.
Important case
The obligations of SIPP Administrators have been the matter of Court proceedings on several occasions but a case that aroused a great deal of interest was Berkeley Burke SIPP Administration Limited v Financial Ombudsman Service Limited [2018] EWHC 2878.
In this case, the High Court upheld a Financial Ombudsman Service decision holding that to act fairly and reasonably in their dealings with clients, SIPP Administrators were obliged (under the Financial Conduct Authority's overarching rules, and by standards of good industry practice) to check investments before accepting them into a SIPP.
That obligation applies even where SIPP Administrators acted on an execution-only basis, simply following the orders of their investor.
Specific guidance
The Financial Conduct Authority (FCA) has issued special guidance to SIPP operators referring to a letter it sent to SIPP Administration companies back in October 2018.
The FCA's view at that point was that regulatory obligations (in force in April 2007 and the subject of guidance in October 2013) explained that SIPP operators had a duty to arrange adequate protection for clients' assets when they are responsible for them.
Whilst SIPP operators are not responsible for SIPP advice given by third parties, such as Financial Advisors, they are expected to adhere to procedures that will allow them to identify instances of financial crime or consumer detriment.
In short, if an investment is accepted into a SIPP by the SIPP provider, they need to be satisfied that it is not a criminal enterprise or detrimental to customers/investors.
This is particularly important when they are introduced to an investor by an unregulated advisor/introducer.
Unregulated collective investment schemes
Historically, many people have been advised by unregulated introducers or even regulated financial advisers, to invest in unregulated collective investment schemes (UCIS).
These schemes are sometimes complex, opaque, illiquid and risky. They are sometimes used to invest in high risk ventures such as overseas property development, films, hotel rooms, parking spaces, green energy initiatives or various strange and esoteric investment proposals.
They may not be covered by the Financial Ombudsman Scheme or carry Financial Services Compensation Scheme protection. Capital is usually at risk.
High risk schemes unsuitable for most
Some time ago, the FCA labelled these schemes as high risk speculative investments which are unlikely to be suitable for most retail customers.
They should only be offered to sophisticated or high net worth investors who are fully equipped to take their own financial decisions. The FCA has set out that SIPP Administrators should make sure that they look at any UCIS investments very carefully.
In short it is now going to be quite difficult for SIPP Administrators to escape liability for questionable investment schemes by adopting the defence that they were simply following an investor's instructions - "execution only".
If an investment seems too good to be true, then even the SIPP Administrators should look very carefully at it before allowing it to be put into the wrapper for which they are responsible.
Concerns about mis-selling of SIPP investments
If you have concerns about the mis-selling of any SIPP investments, James Taylor of Wards Solicitors has experience in these matters and would be very pleased to assist. We will usually offer a free desktop review of the situation to see what can be done.
It is important not to delay when taking advice on these matters because strict time limits exist and frequently trip up investors who will feel that they can await the outcome of a failed investment before complaining about the manner in which it was recommended to them.
Time will usually run from the day that an investor becomes aware that the investment was likely to fail rather than from the day that they are sure the investment is likely to fail.
This subtle difference has been a trap for the unwary so please take advice without any delay. After all, your retirement savings may be at risk.
Wards Solicitors' Partner James Taylor specialises in Financial Services disputes.