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High profile SIPPs case just the tip of the iceberg

The much publicised SIPPs mis-selling case against Berkeley Burke is just the tip of the iceberg in this new twist in UK financial mis-selling and could set the scene for a flood of future claims.

The firm had been involved in a long-running dispute with the Financial Ombudsman Service (FOS) over a 2014 decision that it had mis-sold a SIPP to a client because it gave him poor advice on what to invest his pension money in.

FOS Order

FOS upheld the client’s complaint and ordered Berkeley Burke to pay the client the balance of his pension which had been lost. The firm challenged the ruling, claiming FOS had ‘erred in law’ by creating ‘a new and unexpected duty of care’ on Sipp operators to investigate investments before accepting them into a scheme.

Berkely Due diligence Failure

The ‘duty of care issue’ translated into a failure to carry out due diligence and the firm was given leave to appeal a second time to the High Court by Lord Justice Hickinbottom as he felt the decision was potentially one of ‘considerable and wider importance within the industry and for customers’.

In the meantime Berkeley Burke was being sued by a group of investors who claimed they too had lost money because their savings had been sunk into high risk unregulated investments.

Finally the pressure became too much and the firm were forced to drop the appeal and go into administration after it became clear it could not afford to fight all the claims it was faced with.

Claims are now being referred to the Financial Services Compensation Scheme (FSCS) which is a fund of last resort able to repay the claimants their lost pension funds if mis-selling is proven.

Who’s Next?

But Berkeley Burke is not alone as FSCS is already looking into claims against a number of other SIPP providers, including Lifetime SIPP and Guardian Pension Consultants which have both already been declared in default and unable to repay their customers.

FOS reported a record high of 3,811 SIPP complaints being registered over the last year – an increase of 86% with 61% of decisions in favour of the client.

Industry representatives don’t expect the surge in complaints to end any time soon.

Greg Kingston, of provider Curtis Banks, said: “With SIPP complaints what we are seeing are problems with old investments still crystallising as these investments fail. It is too early to tell whether we have reached a peak but I sense that we haven’t and we will still see a few more of these type of complaints.”

Pension complaints at highest level in five years

Alan Chan, director at IFS Wealth & Pensions, said he suspects there are still more clients who have been misadvised to take out a Sipp by their adviser and are poised to make a complaint.

He said: ”It’s only a matter of time before they too make a complaint. Although most advisers have tightened up in this area of advice and do not recommend Sipps unless the client is, for example, sophisticated and has a real need for the additional features. I imagine there are still a number of clients who were mis-advised.”

Chief ombudsman Caroline Waynman added: “Investment and pension complaints are at their highest level in five years. While self-invested personal pensions can give consumers more control over how and where their pension funds are invested, consumers and advisers need to ensure
this is the right vehicle for them.”


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