Self-Invested Personal Pensions under the microscope

Friday, November 23, 2018

Pension retirement


When it comes to pensions, making the right choice can be confusing without the right advice and support. Do you save under ISAs? Do you increase your employee contribution at work? Or maybe you are thinking about using a private pension scheme to invest your pension funds and yield greater rewards. In recent years, Self-Invested Personal Pensions (SIPPs) have been under the microscope as a large number of people were not fully clear on what they were investing in.

What are SIPPs?

SIPPs first came into existence in 1990 but were not regulated until 2007 and very little guidance was available for providers until 2009. SIPPs work in much the same way as other personal pensions – you add money to your pension as and when you like, you decide where you would like to invest from a list of investments that include funds, shares, investment trusts and more, and, at a specific age, you can start withdrawing money from your SIPP – even if you are not retired – and usually the first 25% of the SIPPs is tax-free. It sounds like the deal of a lifetime, doesn’t it? The trick was in the investments. Prior to April 2006, a ‘permitted list’ of investments was adhered to by the majority of SIPP providers but things changed after this date and SIPPs could now hold any investment, subject to tax charges.

As the name suggests, SIPPs are managed by the investor. They are often taken out by those who want more freedom and control over how their pension is invested or who want to keep investing throughout their retirement. But some of the third party specialists in the past recommended high-risk investments to ordinary investors that were guaranteed to have small or no yield. Those investors were basically scamming people to invest in a high risk SIPP scheme only to line their own pockets, losing their customers’ pension fund.

Some common dubious SIPP investments include:

  • Overseas properties;
  • Off-plan properties;
  • Hotel developments;
  • Harlequin properties;
  • Store pods;
  • Wine;
  • Diamonds;
  • Forestry projects;
  • Australian farmland;
  • Fruit farming projects;
  • Green oil; and
  • Carbon credits

Could you be entitled to claim?

If any of the above sounds familiar to you or to anyone you know, then the possibility of being conned into following a non-fruitful, high-risk SIPP scheme is increased tenfold. The good news is that you can actually claim back some, if not all, of your investment. And if the financial adviser or the SIPP investor tries to wriggle out of returning your money, the Financial Ombudsman Service (FOS) can help.

In October 2018, Berkeley Burke lost its High Court appeal against the FOS. The appeal followed the Ombudsman’s decision against the firm for failing to carry out adequate due diligence on an unregulated collective investment scheme for a client. There were a few people who won back some or their full pension pot by starting a claim.

If you need help to make a financial claim, give us a call on 0800 954 0817 and we’ll be happy to help.