The Financial Ombudsman has reinforced the responsibility of pension advisers recommending overseas property investments when transferring funds into a SIPP.
The ruling came from a complaint by a retirement saver who had transferred money into a SIPP.
The pension saver claimed investing money into a block of flats in the Cyprus capital of Limassol exposed his fund to more risk than he was prepared to take.
The client was recommended the investment by Pension Transfers, an appointed representative of IFA Kingsway Wealth Management in 2009.
In 2016, the client complained to Kingsway about the performance of his pension, but the firm argued another adviser recommended the property and that Kingsway had no knowledge of the investment.
Overseas property guidance is clear
However, ombudsman Doug Mansell ruled Kingsway’s arguments were against guidance issued by the Financial Conduct Authority in a provisional decision.
The guidance says: “Where a financial adviser recommends a SIPP knowing that the customer will transfer out of a current pension arrangement to release funds to invest in an overseas property investment under a SIPP, then the suitability of the overseas property investment must form part of the advice about whether the customer should transfer into the SIPP.”
Kingsway said the third-party adviser must have given regulated advice as he was advising on a SIPP, which is a regulated product.
The firm said it is not “fair and reasonable or consistent with other decisions for Kingsway to be held responsible for advising on the movement of cash out of the SIPP into the Cyprus property.”
IFA must pay compensation
In the final ruling, the ombudsman says Kingsway is responsible for the investment advice and should compensate the client for his losses, plus pay compensation of £500.
“I appreciate it believes Mr M, acting on behalf of a different regulated business, was responsible for advising the client to invest in the Limassol property,” said Mansell.
“Kingsway has provided evidence that another adviser arranged such an investment. But this relates to a different customer, not the client. And it took place several months after the client made his investment. So, I don’t think this has a bearing on this case.
“Kingsway has referred to several similar complaints reviewed by this service, involving itself and other businesses. But while I’ve noted these, I don’t think they are material to this complaint.
“The circumstances and factors applying to each complaint are likely to be different, and I’ve considered the client’s complaint on its individual circumstances.”