Why the claims against SIPP operators are on high rise?

When considering the retirement plans, sophisticated investors often wish to have full control over their pensions. When the traditional pension plans do not perform according to the expectations of the investors, they are advised to invest in SIPP, often opposed to their financial interests.

SIPP have become increasingly popular as it provides the investors a good opportunity to save for their retirement.  The financial advisors often recommend the customers to shift their funds from existing pension schemes to SIPP. The investors view this as a good option to grow their pension pots and maximize returns.

How are SIPP Mis sold?

The reason for introducing SIPP was to fill the gap where the investors were interested in getting full control over their investments.  SIPP are suitable for experienced investors who are willing to take more risks. But there have been enormous cases, where people were made to believe falsely that the investment would outperform other saving options. Also, they were not advised that the investment would be highly risky and non standardized. Unfortunately, people were abused by financial operators to invest in unauthorized schemes. There has been a situations where people have discovered that there investment are worthless upon reaching their retirement stage.


A large spike in the complaints against SIPP operators

A huge increase in the complaints has left us wondering about what’s the issue with the SIPP market. Is it related to the quality of the services? Or is it a result of improper advice from advisors? However, the main reason for such increasing complaints is that the SIPP operators fail to follow the regulatory obligations despite several warnings.

According to the finding of FCA, a number of firms did not possess the required expertise to assess the high risk investments. They lacked the ability to understand the rules that apply to the business.  The lack of regulation has resulted in providing mis leading advice, without properly defining the risks involved. FCA has taken appropriate action against the individuals for failing to provide SIPP advice and not following the due diligence.  SIPP advisors provided improper advice to the investors to transfer their pensions into unregulated pensions such as bio fuels, overseas property etc. Such investments are not only risky but also illiquid which means that they cannot be sold.

The failures identified by Financial Conduct Authority in regards to the performance of SIPP providers are:

  • Failure to not assess the suitability of the investment scheme for the customers.
  • Failure to take adequate steps to disclose conflicts of interests.


What’s next to be done

Since, a lot of SIPP operators are in liquidation stage, the financial services compensation scheme will be handling the claims. FSCS is UK’s compensation scheme that protects the customers of financial service providers. If the authorized firm fails to pay the money it owes to the customers, then FSCS can pay compensation to the customers. However, the firm should not possess sufficient assets to meet the claims. The financial services firm will be declared defaulted if at least one claim has been received against it or if it’s not capable of returning money to the claimants.

Things you need to watch out

The rising claims against SIPP operators has made it quite evident  that people who became a victim of Mis sold compensation were not advised about the risks involved in the investment. It’s entirely in your own hands to choose a platform that you’re going to invest in. If you’re willing to take high risk and have a successful investment history, you might consider investing in SIPP. However, if you if you feel that investing in SIPP may not be beneficial for you, it’s better to invest somewhere else to avoid becoming a victim of Mis sold SIPP.


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