Do you have a Self-Invested Person Pension (SIPP)?
Is it possible this may have been mis-sold to you?
If so, this guide is for you.
You may have noticed increased media coverage over the last ten years or so regarding a variety of mis-sold financial products.
These include the PPI scandal, mis-sold packaged bank accounts (PBAs) and now another example of unethical practices has hit the beleaguered Financial Services Industry; the large-scale mis-selling of Self Invested Personal Pensions (SIPPs).
It was suggested back in 2019 that around £10 billion worth of SIPP investments were mis-sold to UK clients alone, and there are also reports that large swathes of British Ex-Pats were targeted abroad. Thousands of individuals are expected to have been affected and considerable amounts of money are involved.
It has been discovered that huge numbers of SIPP holders should never have been recommended them in the first place and have sadly fallen victim to yet another mis-selling scandal.
In many cases, this has left clients tens of thousands of pounds out of pocket, or even more, which could effectively render a previously healthy pension pot utterly worthless.
Read on to discover more information about SIPPs, what they are, what could constitute ‘mis-selling’ and how to start your claim.
What Is A SIPP?
A SIPP is the shortened name given to a special type of pension plan, namely a “Self-Invested” Personal Pension.
They were introduced by The Finance Act 1989, as a new type of personal pension which allows the individual policyholder a much greater choice in how and where their funds are invested (subject to any specific scheme rules or HMRC restrictions).
They were initially intended for clients with a good understanding and solid knowledge of investment portfolios, who wanted more control over their money and were prepared to accept the higher risks in return for potential higher returns.
However, it has since become apparent that they were also being widely sold to members of the public who did not necessarily have the relevant investment experience and may not have been aware of the high risks, or were falsely lured in with too-good-to-be-true promises of huge profits.
How Do SIPPs Differ From Standard Personal Pension Plans?
In most standard personal pension plans, the policyholder chooses one or more fund ‘types’ to invest their contributions in.
For example, a popular choice may be a company’s ‘managed’ fund. The available funds may be graded by some sort of risk assessment and typically have a spread of different investments within each fund.
In essence, these fund types are controlled by the money/fund managers of the pension provider, with the purpose of maximising returns for their policyholders, whilst minimising the associated risks. They are tightly regulated and restrictions are placed on the type of investments that can be held in each fund.
SIPPs are different. They can invest monies in many more types of investments than personal pensions, and a SIPP holder has more say in where their money is directly being invested.
For example, non-standard investments have been promoted in such areas as luxury hotels in the Caribbean, coloured diamonds, overseas property and even oil fields.
Are SIPPs A Bad Financial Product?
No. There are many people who are happy with their SIPP and have found the returns on their investments to be worth the risk.
The main issue is whether a SIPP is the right financial option for each individual concerned. They are usually a lot more risky than standard personal pension investments, but in the right circumstances and for the right clients, they can present an opportunity for higher returns.
On the flip side, you could lose all your money and have no pension fund available for your retirement.
Unfortunately, as with so many businesses these days, there are some unscrupulous individuals and firms who take advantage of unsuspecting members of the public and recommended SIPPs to those for whom they were totally unsuitable.
So, once again, the Financial Services Industry has been hit with mounting claims for compensation.
In 2017 the Financial Services Compensation Scheme (FSCS) paid out more than £100 million in SIPP claims, which was up over 30% compared to the year before. And when you consider that figure doesn’t include all the successful claims handled by solicitors and CMCs, you begin to see the scale of the problem.
SIPP mis-selling poses a significant threat to individuals’ hard-earned pension pots and, in the worst of cases, could result in severe financial difficulties in retirement. It has been reported many times that individuals caught up in this unwarranted situation may effectively have gambled away the majority or all of their pension monies.
How Can I Tell If I Was Mis-sold A SIPP?
People may think that if you took the decision to self-invest your personal pension savings and the investments backfired, then it is just bad luck or one of those things. However, this assumption can often be wrong.
A client may have been mis-sold their SIPP and, if so, can rightly seek compensation for their losses.
Examples of situations that may fall under the category of financial mis-selling include:
1) Unsolicited Contact
Receiving an unsolicited ‘cold call’ from an individual (by telephone, home visit or online) claiming that they can guarantee you a better return on your money if you invest in a SIPP with them
2) New To Investing
You were new to investing large sums of money and had a lack of understanding or knowledge about the process or investment you were advised on
3) Lack Of Information On Risk
Not being given sufficient or accurate information about how risky an unregulated investment could be, or the SIPP provider not establishing what your own personal attitude to risk levels was
4) A Failure To Carry Out Due Diligence
Where the individual or firm failed to carry out a full and comprehensive financial review prior to setting up the SIPP, which led to the recommendation being unsuitable for the client
5) 100% Safe?
Having been told your investment couldn’t go down in value, or was fully guaranteed, or 100% ‘safe’
6) Pressure Selling
The caller/salesperson used hard-sales tactics that led to your decision, or you were pressured into making an investment you didn’t understand, want or need
7) Tax Avoidance
Having been told you could avoid tax by investing in their SIPP
8) Not Being Transparent On Fees Or Costs
Being unaware of the company’s fees/commission rates or any additional costs that subsequently applied to the investment
9) Poor Or Unsuitable Advice
You were given poor advice to switch to a SIPP, when your existing pension plan was more suitable to your current and future needs.
If any of the above applies to your situation, you may be able to claim compensation and we have access to experienced advisors ready to help.
Are You Financially Worse Off With A SIPP?
As mentioned earlier, a SIPP is not necessarily a bad thing, but in the wrong hands your money may be held in high-risk and unregulated investments, which can go terribly wrong.
If you have a SIPP and it has lost significant value, you may have been a victim of this financial mis-selling scandal and be eligible to make a claim.
Can You Trust The Values On Your SIPP Statement?
Remember also, that even if your annual SIPP statement appears to show that your investments are doing OK, it is important to double-check exactly what type of investments are being used and whether the values are genuine.
For example, if a large SIPP investment was originally made to buy land or to fund an overseas hotel complex, what is the current value of that land and have the hotels actually been built?
It is a sad fact that many building and construction projects across the world fail to be completed or could be delayed beyond the point where you need to access the funds for your retirement.
Mis-sold SIPP FAQ
What Happens If My SIPP Provider Goes Bust?
If you believe the original SIPP provider mis-sold the SIPP to you, you can still seek compensation, even if they have recently gone into administration or are no longer in business. You can either handle the claims process yourself or instruct a company to sort it out on your behalf.
If you are happy to deal with all the administration, calls and evidence yourself, then the Financial Services Compensation Scheme (FSCS) can deal with mis-selling claims up to a maximum of £85,000.
However, if you prefer to have an experienced claims handler deal with your case instead, then Claims Compass can help. We have informative guides available online and an easy way to start your claims journey.
Are SIPPs Protected By The FSCS?
The Financial Services Compensation Scheme (FSCS) exists to protect investors if their financial provider mis-sells a financial product to them or goes bust. Many types of investments are covered by their protection and that includes SIPPs. Note, however, that the maximum pay-out for a valid claim handled by the FSCS is limited to £85,000.
How Safe Are SIPP Pensions?
It is important to remember that the value of investments in any type of pension can go down as well as up. However, the risk of this happening to SIPP investments is inherently greater than, say, a standard personal pension. This is because SIPP investments can often be unregulated and it has become apparent in recent years that thousands of clients were mis-sold this special type of pension.
Self-Invested Personal Pensions were initially meant for experienced investors with a good knowledge of the market and those who were able to accept higher risks to their money in return for higher potential returns. However, many people were duped into moving their money into a SIPP when it was wholly unsuitable for them to do so and, therefore, millions of pounds have already been paid out in compensation claims. If you believe you may have been mis-sold your SIPP, let us help you and contact Claims Compass today.
Are SIPP Providers Safe?
Most SIPP providers are diligent, trustworthy, and experienced in their field. They offer advice and products in the best interest of their client, which is how they should conduct their business.
Sadly, on the other hand, there are also companies around who do not carry out this same due diligence, are dishonest in their sales pitch or employ unscrupulous practices to mislead people out of their hard earned and hard saved money. Unfortunately, huge numbers of clients have fallen victim to such unprincipled and disreputable companies, leading to a substantial increase in compensation claims filed for mis-sold SIPPs.
If you believe you may have been mis-sold your SIPP, use our free online guides to establish if you are eligible to make a claim. Claims Compass can arrange a free, no-obligation call with an experienced adviser to discuss your case further, if you wish, and start your claim.
Is There A Time Limit For Making A SIPP Claim?
Yes, there is.
A claim must be made within six years of being mis-sold the SIPP, or within three years from the point you became aware that the SIPP was mis-sold.
Experienced advisors are ready to help you if you are unsure on the eligibility conditions. They can provide free no-obligation advice and, if you wish to proceed, guide you through the process of making your claim.
What Steps Should I Take To Make A SIPP Claim?
If you wish, you can handle all the elements of the claim yourself by using the Financial Services Compensation Scheme, details of which can be found online. You will be required to source and provide all the necessary paperwork and proof of mis-selling yourself, if you choose this option.
However, you may prefer to have the assistance of an experienced solicitor to process your claim instead.
Claims Compass work with a team of professionals who can pursue the claim on your behalf, using their knowledge and expertise to achieve the highest possible compensation.
If, after reading this article, you feel you may have been mis-sold your Self-Invested Personal Pension (SIPP), we can help.
To arrange a free, no-obligation call with an experienced advisor, please complete the contact form and begin your journey to receiving the compensation you deserve.