A financial advice firm that squandered a £160,000 public sector pension on risky assets in a SiPP has been ordered to pay thousands of pounds in compensation.
Portal Financial, an advice firm based in Kent, helped retirement saver Graham Brown, 59, switch his pension savings from the Strathclyde Pension Fund into the SIPP.
The Financial Ombudsman Service investigated how the cash was invested after a complaint from Brown.
The consumer watchdog found that the firm had switched 85% of the fund into high risk investments that could have wiped out most of his retirement savings if they performed badly.
Unfortunately, the investment performance did not match the predicted outcome.
Failed investments
The SIPP cash was invested as:
- £60,000 into Hypa Raithwaite LP Fund, which loaned money to a property developer who has failed to keep up loan repayments, although the money was secured against a hotel in Whitby.
Portal told Brown the likely return would be around 8% to 11%.
- £24,000 into Venture Oil Investment, a company hit hard by the fall in oil prices
- £9,000 each to Kudos Asia, a Thai holiday resort and EOS Solar, a Cyprus solar energy company. The resort was never built and the solar energy firm is in liquidation. The return on the Thai result was predicted as 10.75%.
Ombudsman Phillip Miller pointed out that Brown was jobless and living off savings of around £4,000 cash when he transferred his workplace pension to the SIPP.
“The money represented his entire retirement savings and he had no other investments,” said the ombudsman.
Unregulated pension investments
“He was told to expect more income and was disappointed when this did not happen.
“Unregulated investments like this come with a higher risk gives to exchange risk, potential political and economic instability, and potential default.”
Despite the risks, Brown went ahead with the transfer even though Portal advised him to stay with the Strathclyde fund due to the level of benefits he would lose moving to a SIPP.
However, he needed cash and took £40,000 from the transferred fund.
The ombudsman ordered Portal to compensate Brown by putting him back in the financial position his pension was in before he followed their investment advice.
