The sad truth is that the pensions of thousands of UK citizens have been put at risk by advisors who have convinced them to pull their retirement money out of safe investments in order to invest in risky, often unregulated investments with the promise of incredible returns. It’s not easy for the average investor to know if the funds they have invested in carrying a suitable level of risk for them.
How to tell if you’ve been mis-sold a pension, and how to get your money back
Having some form of pension plan is essential; with life expectancy continuing to rise, many people will enjoy a lengthy retirement, and need some way of covering the costs of those later years. Generally, that means paying into a pension scheme, with the money invested in stocks and shares.
Unfortunately, hundreds of thousands of people across the UK have been convinced to put some of their money into unsuitable investments via self-invested personal pensions (SIPPs), investments which they were promised would deliver huge returns and ensure they can enjoy a comfortable retirement.
The truth is that these investments may actually be worthless. So how can you work out if you have been mis-sold a pension investment? And what can you do about it?
SIPPS aren’t the problem
SIPPs have been a great addition to the pension savings world, giving people far more control over just what happens to their pension pot.
They were first launched back in 1990, the brainchild of former Chancellor Nigel Lawson, with the idea that individual savers could determine exactly where their pension funds would be invested. After all, not everybody wants to simply hand over a slice of their salary every month and then hope that their pension pot will be sufficient when the time comes to give up work.
SIPPs are designed to allow people to play a much more active role in precisely where that money is invested. That may mean shares that have caught your eye, or picking individual funds to invest in, covering things like the FTSE 100, small companies or emerging markets.
The big selling point of a SIPP is arguably that you can also use them to put your money into slightly more exotic investments, like commercial property. And as all of those investments are kept within the SIPP-wrapper, they enjoy the same tax benefits as investments made through a standard personal pension.
When SIPPs first launched, they were quite expensive and so were really the preserve of only the wealthiest of investors. They weren’t really suitable for more ordinary investors.
That’s increasingly changing though, with a range of platforms offering cut-price services, allowing investors with much more modest pension pots to play a more active role in the management of their money.
No, SIPPS themselves aren’t the problem. The issue comes from some of the investments that individuals have been sweet-talked into making through their SIPPs, high-risk investments which may prove almost impossible to sell on and so redeem any actual value from.
Thousands of investors have been on the receiving end
The regulator the Financial Conduct Authority (FCA) has begun conducting the Financial Lives Survey, where it speaks to thousands of people aged over 18 to find out more about their use of financial services. And the mis-selling of investments sadly featured quite prominently.
According to the survey, around one in eight people who have received financial advice in the last year claim that an adviser has mis-sold them an investment or pension product at some point.
The FCA itself noted that this is likely to be an underestimation, so in truth we are looking at hundreds of thousands of people who may have been duped into making questionable investments in their SIPP.
What’s more, many of them have no idea that they are sitting on a toxic investment.
Examples of mis-sold investments
The FCA regulates the sale of mainstream investments, the stocks, shares and funds that you may normally choose to invest in via your SIPP. However, there are a host of unregulated investments which investors have been convinced into making with their pension funds.
Many of these investments are what is known as unregulated collective investment schemes (UCIS). As the name suggests, the idea is that a host of separate investors pool their money together, for a fund manager to then use to invest in some form of asset, in this case one which is not regulated by the FCA.
Perhaps the most high-profile example of these is Harlequin Property, where investors were enticed into investing their money into properties abroad, including hotels and villas in the Caribbean. UK investors were pushed into putting an incredible £400 million into the firm, with only a fraction of the promised properties ever built and the chairman of Harlequin now facing charges from the Serious Fraud Office.
Other examples include:
- The Resort Group
- Store Pods
- Sustainable Agroenergy
- Green Oil
- Los Pandos Development
- Global Forestry
- Cape Verde
- Elysian Fuels
- Global Cure Environmental Investment
- Parking investments
- Australian Farmland
These investments are not suitable for the vast majority of investors; they are high risk, speculative and can be extremely illiquid – in other words, you can’t sell them on easily. In 2013, the FCA stepped in to ban the sale of these investments to ordinary investors outright; in order to put your money into a UCIS today, you’ll need to be able to prove that you are a high-net worth or sophisticated investor.
The problem is that in the years leading up to the ban, investors could self-certify that they were sophisticated or get an IFA to do it for them. As a result, it was much too easy for the mis-selling to take place.
A professional presentation
Often this mis-selling begins with a phone call out of the blue. The person on the other end of the line will tell you about a fantastic, can’t miss opportunity. Not only will the supposed returns sound attractive – particularly in the current low interest rate environment – these firms will often promise to guarantee those returns for the first couple of years.
A guaranteed return of 14% for two years – who wouldn’t want that?
It doesn’t stop with a phone call either. Investors may be invited to attend professional seminars, where they are convinced that they are dealing with experts who understand these investments and are being presented with a legitimate opportunity.
What’s more, the annual statement you get from your SIPP may suggest that everything is fine, claiming that there is still value in that investment.
The truth may be rather different though; the statement may claim that your investment in overseas land is worth £50,000, but it’s non-standard investment. It is only worth what someone else will pay for it, and in reality that may actually be nothing at all. Unlike stocks and shares there isn’t a ready market to sell these investment so it can be really difficult.
All too often, the focus is entirely on the potentially lucrative returns, with the advisers either underplaying the risks involved or failing to mention them at all.
In our experience, the sums tied up in these mis-sold investments can be significant. They are generally in the £20,000 to £75,000 range, but this varies hugely; we have seen cases where some people have put in hundreds of thousands of pounds. What’s more, many have then told their friends about the investment and encouraged them to put money in too.
What are my options?
If you are concerned that you may have been mis-sold an investment, then don’t panic. It may be possible to pursue a compensation claim against the IFA involved in the investment or the provider of your SIPP.
The first step should be to contact a specialist firm like Hugh James. All our team need to see is your SIPP statement; they will be able to tell immediately if there is an issue with your investment and whether you should consider pursuing a claim. Hugh James will handle the whole claims process for you.
If you prefer, you can raise an initial complaint with the IFA or SIPP provider yourself but many people prefer to instruct a specialist firm with experience of handling SIPP complaint.
If the business doesn’t rectify that complaint to your satisfaction, then after 13 weeks you can raise it with the Financial Ombudsman Service (FOS). The FOS is free to use, and it can order the firm to provide you with some form of compensation, which will also include interest on the money you have missed out on.
Time is of the essence when it comes to raising these complaints, as there are strict time limits in place. Generally speaking, you either have six years to claim from the date the SIPP was established or the date of the transfer of your pension. However, if you are outside this period it may still be possible to make a complaint provided that this is referred to the Ombudsman within three years of the date you knew or could reasonably have known that you had cause for complaint.
If the adviser who sold you the investment is now in default, then the Financial Services Compensation Scheme (‘FSCS’) is another option. It can pay compensation if you have lost money through investments due to bad or misleading advice, negligent management of your investments, misrepresentation, or fraud.
There are no fees for referring complaints to the Ombudsman or making a claim to the FSCS and most specialist firms are able to deal with claims for you on a no win, no fee basis.
Why using a solicitor helps
Using a specialist solicitor not only means that you don’t have to spend time considering and dealing with all the relevant paperwork it also helps ensure that all appropriate points are put forward thereby maximizing the chances of a successful outcome.
We have seen numerous cases in the past where mis-selling victims have pursued a legitimate claim themselves, only to have it turned down due to a technicality or because key grounds have not been particularised. They may then have given up the case, even though they should have been entitled to some form of compensation.
You have a higher chance of success by working with claims experts, who will ensure that there are no technical grounds for turning down your claim and put you in the best possible position to receive what you are owed.
