If you’ve heard the stories of SIPP mis-selling on the news, and you have invested your pension into a SIPP at one point in the last few years, you may be worried that you were mis-sold the investment. Or maybe you have seen the value of your pension fund wiped out because of a SIPP that hasn’t produced the expected (or promised) returns.
But how do you know when you’ve been mis-sold a SIPP? Here’s how.
What Are SIPPs?
SIPP stands for self-invested personal pension. The Government introduced SIPPs in 1989 to give pension holders more control over their personal pensions. The idea on the surface was a simple one – if you were happy to take the risk, you could invest in a SIPP that could potentially give you a greater return than a more traditional pension product.
In other words, instead of your pension provider deciding where to invest the money you would retire on (or have retired on), you could decide.
So, What's the Problem?
For many years, SIPPs were expensive and, as a result, were not considered a ‘mainstream’ investment option. Over recent years, however, new SIPP products have been introduced specifically targeting pension holders with normal budgets.
The problems with mis-selling started quickly after the introduction of the SIPP, with many people making complaints to the Financial Conduct Authority (FCA) about funds they had invested into which had been misrepresented to them.
The issue comes down to the type of investment product. Many SIPP products involve investing money in non-standard and unregulated investments. One example was the well-known AIGO funds, which were non-standard asset-based investments listed on the stock exchange in Mauritius, and which eventually collapsed.
The selling of these investment products is often accompanied by pressurising sales tactics and promises of significant returns – returns far in excess of a standard pension. There are several problems with this, but the crucial point is the pension holder's money is at increased risk and the advice given was misrepresentative or unsuitable. High-risk investment products are fine for experienced investors, but for the majority of British pension holders, high-risk SIPP investments are entirely unsuitable.
Not only are they unsuitable, financial advisors are not supposed to sell them to anyone other than experienced investors, so mis-sold SIPPs has left thousands of ordinary pension holders out of pocket.
Have You Been Mis-Sold a SIPP?
The best way to know if you may have been the victim of SIPP mis-selling is to look at the nature of the investment product. If it was an exotic, non-standard investment product, it may come under the mis-selling umbrella.
That poses another question – what is an exotic or non-standard investment?
There is a huge range of mis-sold SIPP investments that have come into the public domain over recent years. They have been in assets like:
- Unlisted shares
- Property both in the UK and overseas
- Car parking schemes
- Burial plots
- Overseas holiday resorts
- Renewable energy
Other common signs of mis-sold SIPPs include:
- The financial advisor receives a high fee
- Little or no transparency in relation to fees
- High-pressure selling tactics
- You did not fully understand the investment you were investing into
- Your previous pension scheme met your needs
- The advisor did not sufficiently explain the risks involved
- You were advised to invest in a SIPP to avoid taxes
Unfortunately, mis-sold SIPPs are more common than they should be. The Financial Conduct Authority, other regulators, and the Government are taking steps to clean up the industry, but mis-selling of SIPP products continues to rip off hundreds of pension holders every year.