The number of complaints to financial watchdogs by disgruntled pension investors angry about losing money in risky investments has increased by 50% in just a year.
The Financial Ombudsman is handling more than 1,000 gripes from savers with self-invested personal pensions (SiPPs) and small self-administered schemes (SSASs).
The Financial Ombudsman’s annual report shows the number of SiPP and SASS cases have jumped from 697 in the year to the end of March 2013 to 1,039 for the 12 months to the end of March 2014.
Meanwhile, complaints about personal pensions have dropped by more than a fifth – down from 2,207 in 2013 to 1,748 last year.
Personal pensions, SiPPs and SASS accounted for around half of all complaints about pensions handled by the ombudsman.
Poor advice
For the past two years, the total number of pension cases remained at around the same level. In 2013, the ombudsman dealt with 4,401 complaints. The figure for 2014 was just 1% less at 4,361.
Just less than two-thirds of all pension complaints were upheld by the ombudsman after an investigation.
Around 75% were issues about poor investment advice resulting in losing thousands of pounds in risky, unregulated investments for which they could claim no compensation. In some cases, retirement savers making the switch to a SiPP or SSAS lost all their life savings.
Many of the SiPP and SASS complaints involved esoteric investments, including overseas property, carbon credits and buying rainforest plots.
The high level of complaints and huge amounts of money involved in losses has resulted in the ombudsmen finding for a retirement saver against financial advice firm Berkeley Burke’s role in recommending a failed unregulated collective investment scheme (UCIS).
High risk investments
The FCA has published guidelines for advisers that insist SiPP investments should only be considered by sophisticated and experienced investors who understand the risks and have the financial resources to cover a loss – £29,000 in the is case.
This is the first time a SiPP provider has been held responsible for giving unsuitable advice to a SiPP investor.
“Consumers made an increasing number of complaints about SiPPS,” said the report. “Many involve UCIS.”
“The complaints come from consumers looking for higher returns than they can find through more conventional investments. The risks involved in these investments are serious and we find for the consumers in a high number of these cases.”
