The risks involved with advising on self-invested personal pensions (SIPPs) are apparent from the latest figures from the Financial Ombudsman Service (FOS). These data show that during the first half of the current financial year – April 1 to September 30 2016 – a higher proportion of complaints about SIPPs were upheld by FOS adjudicators than for any other product area.
The FOS decided in the client’s favour in 58% of the SIPP-related cases it closed during the six-month period. The overall number of SIPP complaints being received at the FOS is also on the increase, as there were 649 cases between April and September, compared to 1,097 in the entire 2015/16 financial year.
Some claims management companies are becoming involved in the pensions advice arena, and are particularly active in pursuing claims on behalf of customers who were recommended SIPPs, when a regular personal pension may have been just as good, if not considerably cheaper.
Firms thus need to be confident that a SIPP is the best option for the client before recommending them. They must also note that they are responsible for ensuring that the underlying investments the SIPP contributions will be invested in are suitable.
Financial Conduct Authority guidance says that when considering pension switches, firms must always ask themselves ‘will the existing plan meet the client’s objectives?’ If the answer to this is Yes, then it becomes very difficult to justify a recommendation to switch, whether to a SIPP or any other form of pension arrangement.
SIPPs are considered to be a high risk area by the regulator, and firms active in this market can expect considerable scrutiny. They are complex products which often carry high charges. A client should not be recommended to switch to a pension arrangement with higher charges without good reason, and a SIPP should not be recommended if the individual requires a simple investment mix that would have been available via a conventional personal pension.
SIPPs now also have a higher uphold rate than payment protection insurance (PPI) complaints. 57% of the PPI complaints closed during the first half of the 2016/17 financial year were decided in favour of the complainant.
PPI still accounts for more than half of the new complaints being received by the FOS, but numbers still seem to be falling slightly – the Service took on 86,476 new PPI cases during the first half of the 2016/17 financial year, compared to 186,994 in the whole of 2015/16.
The uphold rate for payday loan complaints between April and September was 54%, slightly lower than in the recent past, but along with SIPPs and PPI, it is one of only three products where the majority of complaints are being upheld. There have already been 5,421 payday loan complaints to FOS in the 2016/17 financial year, compared to 3,168 for the entire period between April 2015 and March 2016.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.