Self-invested Personal Pension Schemes (SIPP) – Have you been mis-sold?

The importance of saving for later life is well known in this day and age. Whether you have a personal pension, defined contribution pension, or some other arrangement, it is essential to have a sensible plan in place to help secure a sound financial future later on in life.

One particular form of pension arrangement has recently hit the media headlines as a result of a number of mis-selling scams: self-invested personal pensions (also known as “SIPP”). Unfortunately, it has come to light that a significant number of people have been advised to transfer their current pension arrangement to a SIPP, and then wrongly advised about the benefits and terms of the same. Where that transfer has caused the client to suffer loss to their pension fund, they may well be eligible for compensation.

What is a SIPP?

A SIPP is a pension that holds investments until you retire and start to draw a retirement income. It is a type of personal pension and works in a similar way to a standard personal pension. The main difference is that with a SIPP, you have more flexibility as to which investments you choose, the ultimate aim being to increase the value of the pension fund.

The problem with SIPP’s

Whilst a SIPP does allow investors access to a far wider range of investments, problems can easily arise where a SIPP is invested in high risk, non standard assets. A non-standard asset tends to pose a high risk of loss, because it cannot be accurately valued and readily realised. They might include longer-term deposits that are not available within a month, and sometimes commercial property.

For example, in Berkeley Burke SIPP Administration Limited) v Financial Ombudsman Service Limited, Berkeley Burke included an unregulated and non-standard investment with an energy company based in Cambodia. The energy company entered into administration shortly after an intervention by the serious fraud office and, as a result, the SIPP investors suffered substantial loss in personal pension funds. Similarly, a couple have recently been reported to have lost around £22,000 after an
unregulated financial adviser invested £22,000 worth of their pension fund in a non-standard agricultural development in Costa Rica.

In contrast, a standard asset is anything that is readily realised and more likely to be accessible when you want it and at a value you want it to be. These might include cash bank accounts, regulated unitised funds and shares listed on recognised stock exchanges.

There have been a number of SIPP scams in the headlines in recent years. This is largely due to some unscrupulous independent financial advisers, discretionary fund managers, and SIPP providers making promises to their clients on the level of returns they can expect form their pension investment. Investors have been tempted by highly specialised investments that promised eye-watering returns, but without necessarily appreciating the equally eye-watering level of investment risk that goes with them. When these investments fail, significant sums of money can be lost from a person’s hard earned pension.

Seeking Compensation

There are potentially a number of sources from which you may be able to claim compensation, if you have been wrongly advised about a SIPP. As a first port of call, the Financial Services Compensation Scheme (FSCS) protects consumers when financial services firms fail. Eligible customers will be able to bring claims against the FSCS up to the limit of £85,000 in relation to SIPP claims.

In September 2019, the Financial Services Compensation Scheme paid out £53 million to consumers who had been mis-sold SIPP’s by independent financial advisors belonging to Berkeley Burke SIPP Administration Limited.

In addition to this, investors potentially have three further claims against their independent financial adviser, discretionary fund manager and/or their SIPP provider, depending on who gave the advice.

Conclusion

Given the number of potential defendants, the process of bringing claims in relation to SIPP’s can often be complex. Our team of specialist banking and finance lawyers can assist you with the assessment of your mis-sold pension claim and advise you on the best avenue to seek damages and or compensation.

If you have incurred losses as a result of a SIPP transfer, and would like to explore the possibility of making a claim, then please feel free to contact Henrietta Dunkley in our specialist Banking and Finance Litigation Team for a no-obligation preliminary review of your claim. Please call Henrietta on 01202 057863 or Ellie Sherriff on 01202 057758. Alternatively, please email Henrietta.Dunkley@ellisjones.co.uk.