Since George Osbourne’s announcement in 2014 that over 55s would be able to freely access their retirement funds, the scandal regarding pension reforms has been growing. Increasing investors are coming forward to report a missold pension, most often by SIPP providers. Recent reports by The Sunday Times focus on how SIPP providers have gone out of their way to catch investors, offering free reviews as a way to convince of their reliability. But the law is catching up with these cowboy companies, with some SIPP investment firms facing over 400 individual claims against them.
Cracking down on unregulated firms
New Model Advisor led the initial investigation into the firm Avacade. Investing in an Ethical Forestry scheme, this unregulated introducer firm capitalised on the vogue for eco-friendly investments and hit customers who were already involved in investing in this sector. The company’s modus operandi was to cold call potential investors and offer free non-advised pensions reports. The FCA stated looking into unregulated introducer firms soon after, particularly those who had a suspicious history in moving pensions assets.
Making necessary changes
Soon after, the FCA’s Peter Smith told SIPP providers that they “had a choice to make” on behalf of the customers. The implication being that they should be making these choices on with due diligence and a clear assessment framework. The existing SIPP providers were obliged to relook at their compliance with existing regulations and ensure that both the letter and the spirit of the law was followed. What should have followed was an overhaul of the SIPP providing framework, with customers better informed and safer financially as a result. Unfortunately, SIPP providers have been dragging their toes.
SIPP firms backlash
When, in 2018, the FSCS stated that fault remained primarily with the SIPP providers, the financial industry breathed a sigh of relief. At last, it seemed as if the SIPP firms would be held to account, and customers would see some reprieve from the growing missold pension compensation scandal. Unfortunately, the SIPP firms have not responded well. The current Amps chairman Zachary Gallagher has complained publicly about the FCSC’s decision, arguing that it will encourage an avalanche of claims against SIPP providers, even those who do not have questionable practices.
But the real question is are there any SIPP providers without questionable practices? With the FCA’s damning indictment that most firms failed to do due-diligence with investors’ money, customers affected would be wise to check out any investment they have through a SIPP firm.