Mid-Sold SIPPs Claims – What Are They?

Self Invested Personal Pensions (SIPPs) give people under the age of 75 the opportunity to manage their own pension pots. SIPPs were first introduced thirty years ago in the 1989 Budget and, since that time, they have become more and more mainstream with over a million people having now established one. The unveiling of the Pensions Freedoms in 2014 created a wave of new investors wanting to have flexibility when accessing their pension funds.

SIPPs are considered to be a tax efficient and flexible way of investing for the future and retirement. It is possible to place a wide variety of investments into a SIPP but if an investment is made in ‘taxable property’ there are penal tax charges. For that reason SIPPs have generally been more suited to experienced investors with larger pension pots, who understand investing and the risks involved or who take advice from a regulated financial adviser.

However, with the changes in the market it has become easier for less experienced people to invest safely. This in turn has meant that SIPPs have become the product of choice for scammers who take advantage of people who are less experienced but have access to potentially significant pension funds.

Mis-sold SIPPs

One way in which investors have been misled into establishing SIPPs, which may not be suitable for them, is by the targeting of them by unregulated introducers.

The unregulated introducers sell the idea of making an investment which will give them a greater return on their pension funds than in the pension scheme in which they are currently invested. These investments are often highly risky, illiquid and/or overseas, such as investments into hotel schemes in the Caribbean, biofuels and storage pods.

The introducer refers the investor to a regulated financial adviser who then advises on the suitability of different SIPPs but fails to advise on the risks of the underlying investment. A SIPP is established, the pension funds are transferred into the SIPP and then the funds are used to invest in the speculative investment, often with the result of a loss of all or a significant part of the pension funds.

Many claims have been successfully brought against the financial advisers for advising only in relation to the establishing of the SIPP. However, those claims may not always fully compensate investors where there has been a significant loss of funds and the financial adviser has entered into insolvency. Consequently, investors are now turning to claims against the SIPP Operators themselves.  A SIPP Operator is who the investor transfers their pension funds to prior to it being invested via a SIPP into the product/investment in question.

Claims against SIPP Operators

Claims against SIPP Operators are a new and developing area of law with the Courts now considering cases with a view to determining what duties were owed by SIPP Operators to the types of investor described above.

Much turns on what duties the SIPP Operators owed to investors in terms of undertaking due diligence about the work that was being referred to them by financial advisers. SIPPs are regulated by the Financial Conduct Authority (FCA) who have intervened in the various Court proceedings to set out its position on the duties which they consider were and are owed by the SIPP Operators. This was shown last year in the high profile Berkeley Burke judicial review case.

Eligibility

A person may be eligible to pursue a compensation claim against their SIPP Operators if any of the following applies to their circumstances:

  • They were persuaded to invest their pension funds into an unusual and high risk investment without the investment being fully understood by them;
  • They were advised separately by a financial adviser to establish a SIPP in order to make the investment without receiving advice on the investment; and
  • That investment was made by the SIPP Operators without question.

There are time limits in place for claims against SIPP Operators. An investor has either six years to claim from the date they transferred their pension funds to the SIPP (and the investment was made) or three years from the date they became aware, or ought to have been aware, that they had a possible claim against the SIPP Operators.

How Can Nelsons Help?

Cathryn Selby is a Partner in our Dispute Resolution team specialising in professional negligence claims.

For more information about claims against SIPP Operators, please contact Cathryn or another member of our expert professional negligence team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.