If you have a dodgy investment in your SiPP pension and the provider gives no warning that you can lose your money, who’s to blame?
Logic would seem to dictate the pension provider has a duty to tell consumers if they suspect an investment is not performing as expected.
But although some providers whisper warnings to their counterparts in other firms, no one is brave enough to blow the whistle, according to financial expert Mike Morrison, writing in Retirement Planner magazine.
In a revelatory article, Morrison reveals some providers do little to screen investments.
Some firms who believe they are ‘quality providers’ pass warnings up and down a private grapevine, says Morrison.
But warnings are kept secret because providers fear libel writs from disgruntled investment firms are more trouble than protecting the cash entrusted to them by customers.
Informing HM Revenue and Customs (HMRC) is also a non-starter because most providers claim no action is taken if they pass information to the tax man.
The result is the adviser who recommended the investment to the customer ends up taking the blame – while the customer may have no financial protection for losing thousands of pounds in unregulated investments.
Some SiPP providers admit they may have realised something was wrong with some investments after a few months, but admit they told no one and their customers either lost money or had to make a claim against their adviser or from the Financial Services Compensation Scheme.
Morrison’s article also claims one advice firm with ‘just a couple of advisers’ arranged 2,000 SiPPs in two or three months without raising the attention of a regulator.
Lack of protection
The firm went to the wall facing a flood of compensation claims worth millions of pounds.
The directors were banned and fined for giving poor advice by regulator the Financial Conduct Authority (FCA).
Yet no one warned consumers of the risks in investing in a SiPP with this firm.
New rules coming in September will require SiPP providers offering non-standard assets to hold more cash in reserve.
The object is to price smaller, low quality SiPP providers out of the market by raising the entry barriers for them.
As a strategy, time will tell if the measure works.
Until then, consumers still have no watchdog with teeth safeguarding their retirement savings and only themselves to blame for following bad advice.