The recent collapse of the SIPPS arm of pension provider Berkeley Burke has highlighted the issues faced by many consumers who continue to receive bad advice on their personal investments. In 2014 the Financial Ombudsman Service (FOS) ruled that Berkeley Burke had to offer compensation to a client if there was lack of due-diligence regarding investment advice. The court heard that a large number of customers were advised to transfer their money into a SIPP with Berkley Burke.
Due to the risky nature of these types of investments, consumers should only be advised to transfer their money into these vehicles if they earn over £100,000 a year, or if they hold the status of being a “Sophisticated Investor”. As a result, customers lost of tens of thousands of pounds due to their money being placed in a high-risk investment. The FOS found that there was a lack of ‘due diligence’ when advising a client to move their money into a high-risk investment called Sustainable AgroEnergy.
The collapse of Berkley Burke’s SIPP division
Berkeley Burke appealed the ruling in 2018 at the High Court, where the judgment was upheld. However, in February 2019, they were granted the right to take it to the Court of Appeal by Lord Justice Hickinbottom. The two-day hearing was due to begin in mid-October last year, however, Berkeley Burke’s SIPP business went into administration a month before the hearing took place. This has left ex-customers of the firm unsure as to how they would be able to pursue their claims. More than 800 complaints have been lodged with the FOS, along with 28 clients through court action made as part of a group litigation.
According to the appointed administrators, RSM, the collapse of the SIPP arm of Berkley Burke could mean that the FSCS foot a bill exceeding £158m. While sale of the company’s SIPP division has been agreed with Hartley Pensions, the new owners will not take on liability for the outstanding claims. £150m is comprised of complaints raised with the FOS, while the remaining £8m is part of the group court action case.
Why was the decision made?
Earlier in the year, London Capital & Finance collapsed. It emerged that the firm had been selling risky mini-bonds, and when they went into administration, they owed £236 million to over 11,000 clients.
The FCA’s handling of the situation was heavily criticised by both the clients and the government, as it was found that the regulator had been aware of the issue three years previously, but hadn’t done anything about it.
As such, it was decided that the promotion of mini-bonds should be banned for a period of 12 months initially, as they’re considered too problematic for casual investors. Andrew Bailey also adds: “This risk is heightened by the arrival of the ISA season at the end of the tax year, since it is quite common for mini-bonds to have ISA status, or to claim such even though they do not have the status.”
Am I owed compensation for SIPP mis-selling?
Due to the many scams involved with the mis-selling of SIPPS and unregulated investments in recent years, many advisors within the financial sector are frustrated at how frequently the FCA has been forced to step in as a result of poor due-diligence.
SIPPs are usually only suitable for investors with a lot of experience, wanting to personally manage their pension and the investments. If this was not your intention but you have a SIPP you may have been given poor advice or even misled about the risk involved. If so, you may be eligible to make a mis-sold SIPP claim.
In order to find out whether you were a victim of SIPP mis-selling and due compensation, get in touch today and speak to one of our professional team. We will help identify whether your SIPP was mis-sold to you and discuss options on how you may be able to claim compensation. Call us today on 0808 163 1659 or email firstname.lastname@example.org .