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Mis-Sold SIPPs: A Guide for Consumers

Attracted by high returns, people increasingly opt for Self-Invested Personal Pensions (SIPPs). Unfortunately, however, these investments can be extremely risky.

Mis-selling SIPPs has become an increasing source of concern among British citizens, and in 2018 alone the Financial Services Compensation Scheme awarded 123m in compensation claims alone.
Lack of Knowledge
Mis-sold SIPPs can be a hugely detrimental problem to many across the UK, rendering their pension pots virtually worthless.

Advisors may invest clients’ funds in unsuitable investments without fully explaining them or any associated risks, leading to clients losing substantial sums due to being misled on risks and strategies; consequently it is essential that clients seek legal help and work with an expert solicitor in claiming a fair compensation claim on their behalf.

One common method of SIPP mis-selling involves advisers suggesting moving a client’s pension account without fully disclosing all associated risks, which can be especially risky as you may not always be able to reclaim any losses should a SIPP provider become insolvent.

If you have concerns, it would be prudent to check their provider’s record with the Financial Conduct Authority (FCA). This will give an idea of their performance as well as any losses their clients may have incurred over time.

Note that investments made within a SIPP are generally covered by the Financial Services Compensation Scheme (FSCS), meaning in the unlikely event of failure you can still make a claim against mis-sold pensions. You can click the link: to visit their site.

The Financial Services Compensation Scheme (FSCS) lays down several guidelines that companies must abide by when providing advice to clients on how to move their pensions to another provider, including ensuring clients understand all risks, fees and charges associated with moving, as well as no undue pressure to move before it is time for them.

However, this has not prevented some unscrupulous advisors from persuading their clients to invest in SIPPs with high-risk investments that are unsuitable for them.

This has resulted in an avalanche of claims being filed, prompting The Sunday Times to label this incident the ‘dawn of a new mis-selling scandal’ resulting in billions being lost and more than PS695m having been paid out by the Financial Services Compensation Scheme to date. You can visit this site for more information.

This means that if you were mis-sold a SIPP as a part of this mis-selling scandal, chances are strong that compensation could be available from eligible compensation claims being considered by The Sunday Times and the FSCS to date.

Unsuitable Investments
As investors scrambled to protect their wealth during 2008’s financial crisis, unregulated investments flooding onto the market began offering attractive ‘target’ returns that could form all or part of a SIPP plan. These were marketed as an alternative to more regulated options and often featured high-pressure sales tactics.

Many of these investments were not suitable for most investors and caused them to experience significant losses; these losses sometimes emptied investors’ pensions and prevented any other investments being made elsewhere.

Financial advisers sometimes recommended unsuitable investments. Their duty was to their clients, and they should have conducted some due diligence into any schemes before advising their client to invest.

But, unfortunately, they haven’t always done so, which can result in inadequately protecting clients’ savings, leaving them open to losing out financially and, in extreme cases, seeing their retirement savings lost entirely.

Adams v Options SIPP UK LLP illustrates this point. In Adams, the plaintiff alleged that an unauthorized introducer offered to transfer into his SIPP an investment that did not fit his needs and circumstances.

Judge Haigh found in this case that an authorized firm acting solely as an execution-only firm could not be held liable to its members for losses caused by investments which proved unsuitable, since COBS 2.1.1 requires them to implement procedures and controls to detect instances of consumer detriment.

So it is vital that you review the terms of your contract with an authorized firm carefully. If your agreement states that you are not responsible for investments that may be unsuitable to you, this should serve as a clear warning sign that may indicate unsuitability; and seek independent financial advice immediately for help and advice in assessing its suitability for you. This is a vital step in the investment process.
Tax Implications
SIPPs (Self-Invested Personal Pension Plans) allow you to take control of your investments, with tax efficiency and multiple investment options. SIPPs can be particularly helpful for people wanting to manage their own money but lacking experience in investment management.

Recently, there has been an upsurge in mis-sold SIPP schemes being offered to UK citizens. These non-standard investments tend to be high-risk and can cost considerable amounts when investing. Furthermore, many of these non-standard schemes can become difficult or impossible to sell in times when funds need accessing.

If you believe you were mis-sold a SIPP scheme, there are a variety of steps you can take. One option would be contacting your financial adviser and lodging a complaint; make sure you send all pertinent evidence with them to support this claim.

This can help the company decide whether or not to accept your complaint, and if they do so you could receive compensation (the exact amount depends upon individual circumstances).

Your financial adviser should respond within eight weeks if you file any complaints, so it is crucial that they have as much evidence available for review as possible.

If you invested in a non-standard SIPP scheme and experienced losses as a result, compensation may be available if you were not provided with clear advice about its associated risks.

Your financial advisor should never suggest investing in one scheme without providing all of the relevant risks information – this can be extremely misleading and lead to decisions being rushed into quickly without due thought being given to each situation.

Pension investing is a complex market, so no single solution fits every customer. Financial advisors might offer SIPP schemes which aren’t right for your individual circumstances even though they claim extensive knowledge in finding appropriate investments.

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