Mis-sold pension issues have remarkably increased in the recent past. MedDen Financial Services LLP, a financial advisory firm has been ordered to pay compensation after providing unsuitable advice to a client to use “SIPP-Self-invested personal P-ension” to invest in a spa resort. According to “FOS- Financial Ombudsman Service,” the firm advised Mrs. E to transfer his pension benefits to a SIPP. The SIPP refers to a pension where a member reserves the final decision on how to invest the saved funds.
The client held a “PPP-Personal Pension Plan” had accrued benefits in a benefit “OPS-Occupational Pension Scheme.” The clients transferred the two pension schemes into a SIPP and then invested the highest percentage, 87.5% of the finances into 4 distinct “UCIS- Unregulated Collective Investment Schemes.” Once she attempted to secure the pension benefits, the client discovered that the funds were not liquid and decided to file the complaint. According to the investigator, the investments were of higher risk and not suitable for any investor.
The UCIS also affirmed that the transferred funds were potentially illiquid and volatile. Portafina, the MedDen representative disagreed and held that the investments were ideal for Mrs. E. The firm argued that it had advised Mrs. E not to transfer the OPS, but the client insisted to do otherwise. Although the ombudsman pointed out that the client had minimal experience on investments, Portafina pointed out that Mrs. E had substantial assets and buy-to-let properties.
MedDen argued that it had taken the necessary steps to make sure that the UCIS investments were relevant and ideal for the client. According to the ombudsman, the retail client was seeking expert advice on how to make viable investment decisions.
The financial advice firm was supposed to act professionally, fairly and honestly to safeguard the best interests of the client. However, the ombudsman pointed out that MedDen failed to follow the necessary professional steps while advising Mrs. E, especially the failure to make more inquiries about the client’s transfer reasons. The ombudsman ordered MedDen to put the client very close to the original financial position. Many UK investors continue to file claims related to SIPPs each year. The unsuitable and risky SIPP investments have remarkably increased the number of mis-sold pension claims each year. Financial experts point out that it is very risky to invest SIPPs in non-tangible investments. Some of the tangible SIPP investments include residential property, horses, and wine. Most individuals who invest in foreign exchange products and commercial property continue to incur massive losses. SIPP investors can consider several claims including:
– FSCS (Financial Services Compensation Scheme): For any firm regulated by FSCS, the maximum compensation is £50,000.
– FOS: The maximum complaint that would be made to the FOS is £50,000.
– Common Law Claim: Apart from making “FSMA-Financial Services and Markets Act,” investors can file claims for suffered losses under the common law.
– Statutory Duty Breach: All financial promotions should adhere to the FCA rules and regulations.
– Unauthorised Financial Promotions: Under FSMA rules, section 21, only firms authorised by FSMA can communicate an inducement, invitation or communicate in an investment activity.
– Unauthorised Investment Advice: Under section 19 of the FSMA Act, only authorised individuals can perform regulated investment activities such as providing advice on how to manage investments. The number of mis-sold pension claims related to SIPP is expected to increase exponentially in the coming years.