SIPPs – where does the buck stop?



The recent ruling of the Financial Ombudsman found in favour of investor- “Mr A” and against Berkeley Burke, a SIPP provider who had managed a £25,000 investment made by Mr A in Sustainable AgroEnergy.

Mr A had been advised by an “unregulated agent” who had an introducer agreement with Berkeley Burke.

So Berkeley Burke argued that they were “only taking orders” and couldn’t be held responsible for the advice. As SIPP providers, Berkeley Burke argued they were not authorised to give advice.

But the Ombudsman would have none of that. Berkeley Burke was a personal pension provider and had a duty of care towards Mr A (and by extension all other clients in SIPPs).

This judgement is going to send shivers down the spines of SIPP operators, already under regulatory pressure to hold greater reserves. The SIPP industry is dependent on investors who know what they are doing. Investors who one minute reckon that a £25k punt on Sustainable Agro-Energy and the next are arguing that it is all the providers fault for taking their money are on a sticky wicket – in my opinion.

They should have no more right to their money back when an investment fails than I have from the bookie if my horse isn’t a winner.

But that’s simply my view and it’s clear that Berkeley Burke are considered to have a duty of care to all investors. This means they are going to be responsible not just for the operation of the SIPPs but for the performance of the investments.

This can only mean one thing- “tougher rules”. Rules already exist for insurance companies who are given guidance on what are and are not “permitted links”. I would have been very surprised if Mr A’s investment would have been considered a permitted link to an insurer so had Berkeley Burke been offering the investment as an insurer- I would have no sympathy.

But Berkeley Burke are not an insurance company and I think they can legitimately argue that without comparable guidance to the permitted links stuff insurer’s get, how do they know where to draw the line?

The trouble is that we do not regulate the behaviour of investors, Mr A may be a mug, or he may be a serial claimant or he may be a genuine victim. But the ombudsman has found in his favour and Berkeley Burke will pay him back his £25k + a further amount for the opportunity cost on the money;- so whatever we may think of him, the law says he was ill-treated.

I suspect that the only way that investors like Mr A can be protected from themselves is to prevent them investing in regulated products. The tax privileges offered to SIPPS and the marketing advantages they give  to SIPP operators bring with them responsibilities. We- the tax-payers can expect something for our money.

This may go against the spirit of self-investment but it seems to me there are many people like Mr A who have no business investing in these kind of funds and if we can warn them and their shady advisers off, so much the better. This may make it harder still for the genuine self-investor to ply his or her trade but this is a small price to pay for a properly regulated sector.

The Financial Conduct Authority has launched three reviews into the Sipp sector since 2009, highlighting the standards which pension providers must uphold.

The results of its latest review found that many companies were failing to fulfil their regulatory obligations, despite previous warnings. The watchdog has also written to the chief executives of all Sipp providers, urging them to operate within its rules.

Whether they like it or, it seems that for the SIPP operators, the buck has stopped with them.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to SIPPs – where does the buck stop?

  1. Henry, very intersting blog and I agree with your views. The clue is in the name “self-invested personal pension” or in HMRC parlance “member-directed” and surely the member has to take responsibility for his investment choices and for taking independent financial advice where he doesn’t understand the investments. In my experience the vast majority of SIPP providers allow members as much flexibility as possible with regards to investments provided they are satisifed the investments are legal and will not amount to unauthorised payments. Investments of the nature involved in this case are usually dreamt up by the member’s financial advisers long before the SIPP provider becomes involved. I’m not sure this judgment will do members and favours either: their SIPP providers’ costs will increase and they mayl be much more restrictive on the investmnts that they will allow.

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