A SIPP is an alternative form of personal pension plan and were developed to allow the consumer greater control over the type and level of investments that they wished their pension funds to be placed in.
When first introduced, SIPPs were generally intended for clients with a healthy pension pot, a degree of investment knowledge and a willingness to invest in potential higher risk products. Experience has shown that this has not always been the case.
SIPPs are a regulated product under the provisions of the Financial Services and Markets Act 2000 (“FSMA”) meaning that they are subject to certain restrictions and protections. SIPP operators must be authorised by the Financial Conduct Authority (“FCA”) and must adhere to the regulatory regime established under FSMA.
Why were they recommended?
Clients were encouraged to transfer their existing pension arrangements into SIPPs on the promise of greater returns and more control over their pension funds. In many cases, the clients did not have investment experience and therefore relied entirely upon financial advisors to assist them in making their choices.
How were they mis-sold?
Clients were advised to transfer their pensions by advisers who had not properly considered whether this was appropriate in light of the necessary criteria including, the size of their pension fund, their attitude to risk, their capacity to incur losses and the overall suitability of the proposed underlying investments.
In many cases, the advisor failed to consider the benefits that clients were sacrificing by transferring out of their existing schemes (which included final salary pensions and guaranteed annuities).
Clients were encouraged (often by unregulated third parties) to transfer their modest pensions into SIPPs with a view to investing in high risk, illiquid, financial products. Many of those products were unregulated and included:
- Carbon Credits
- Overseas property developments (such as Harlequin)
- Agricultural land in Australia
- Rice farms in Africa
- Tree plantations in Brazil and Costa Rica
- Store pods
- Bio-Fuel producers
- Wine Producers/Vineyards
In many cases the investments failed such that the value of the client’s pension was all but extinguished.
A further consequence of the failure of the investments is that clients have remained liable for the SIPP administration fees without any means to pay for them. The extent and impact of the SIPP administration fees was very often overlooked or ignored by the financial advisor who assisted the client in setting up the SIPP. Consequently, clients were not aware of the extent of their liability for these fees until it was too late.
With many clients close to their retirement, the loss of their pension has had a significant and dramatic effect on their lives.
If you have received negligent advice, or the SIPP Administrator has failed to act in accordance with its obligations, you may be able to make a claim for your losses in the form of compensation.
Where you have suffered a loss as a result of the negligent advice of a regulated advisor, redress is possible through several routes depending upon the status of the advisor. Where the advisor remains solvent, a claim may be brought either via the Court or through the Financial Ombudsman Service (“FOS”). Where the advisor is no longer operating, it may be possible to bring a claim through the Financial Services Compensation Scheme (the “FSCS”). It should be noted that both the FOS and the FSCS have set limits as to the level of damages they can award (£150,000 and £50,000 respectively).
Where the advisor is not regulated, the consumer is limited to bringing a claim through the Court. Difficulties can arise if the advisor is no longer operating or has limited assets. In those circumstances, we would consider the position at the outset of any claim to ensure that you are aware of the potential risks of commencing a claim.
It may, depending upon the circumstances, be possible to bring a claim against the SIPP administrator itself for failing to comply with its regulatory duties when setting up the SIPP and accepting investments into its product. The FCA has taken an increased interest in the operations of the SIPP Administrators in this regard. The FSCS has also recently indicated that claims may now be possible in circumstances where the SIPP Administrator is no longer solvent.
Where you remain liable for the SIPP Administration fees we are able to take steps to either reduce or suspend payment of those fees until your complaint has been resolved.
How much will it cost?
We are able to offer you flexible funding arrangements, including “no win, no fee” agreements and will discuss the options available to you at the outset to ensure that you can make a fully informed decision.
In the first instance, we will undertake an initial discussion with you, free of charge, to allow us to consider whether we can assist you with your claim.
How can we help?
Seth Lovis & Co have a dedicated team of lawyers who focus solely on financial litigation matters. With significant experience across the team, we have the expertise to advise on a wide range of situations arising from the mis-selling of financial products and services. We work with barristers and experts who are at the top of their respective professions in order to ensure that our clients receive the best advice possible with a view to achieving their goals.
To discuss a new matter with us, please contact us on 0330 134 2582 or submit details of your matter using the online enquiry form to the right hand side of this page.
For further information on SIPPs and to read some of our success stories, please click here.