Pensions  

Ombudsman backs Standard Life over esoteric Sipp investment

The Pensions Ombudsman has rejected a complaint made against Standard Life over an apparent failure to undertake sufficient due diligence over non-mainstream life settlements bonds investments that were placed into a self-invested personal pension.

Jane Irvine, deputy pensions ombudsman says the complaint should not be upheld against Standard Life because “no injustice” was caused to investor Walter Pisarski as a result of any failure on the part of Standard Life.

She adds that while the firm “may take a less conservative line than other providers” in relation to allowable investments, it is acting within tax rules which state that “any investment which does not give rise to a tax/property charge” is able to be placed into a Sipp.

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Ms Irvine warns that Sipps are not suitable for all consumers and are only appropriate for people “who want to control and actively manage their pension investment”.

In the wake of a number of scandals in recent years, a number of Sipps firms have called for a return of an allowable investment list, which would simplify due diligence and limit the risks for providers that wish to provide access to the widest range of investment options.

The complaint stemmed from December 2009 when Mr Pisarski completed an application form for the Arm Assured Income Plan. Following advice provided by Rockingham Independent Ltd Mr Pisarski intended to make an investment in Arm bonds of £125,505.92.

Rockingham was placed into liquidation in March 2012 after being fined £35,000 by the then Financial Services Authority in August 2011 over sales of the products.

In September 2011 Standard Life wrote to Mr Pisarski to tell him that dealing in the Arm Assured Income Plan had been suspended.

Mr Pisarski stated that he expected Standard Life to objectively consider if the investment was acceptable to be held in a Sipp and argued that the amount of due diligence was not reasonable.

Ms Irvine responds that the limit of Standard Life’s responsibility as administrator is to consider whether or not an investment falls within the list permitted by HMRC so as not to give rise to unauthorised tax charges.

She adds that it is “clear” that the investment had been made by Mr Pisarski only after he had received and accepted the advice of Rockingham and that it was made prior to the release of the Financial Services Authority report on Sipps in October 2012.

Ms Irvine goes on to criticise the soft regime that existed prior to this in relation to Sipps, stating that the investment decision had been made when there had been a relatively low level of regulation of Sipps by the FSA and the duty to undertake due diligence on investments had been less stringent.

She continues that the regulatory framework for the operation of Sipps was introduced “somewhat hastily” and it has taken some time for the regulator to “get a good grasp of Sipps and how best to regulate them”.

The only obligation placed on Standard Life at the time was to assess whether a proposed investment met the HMRC requirements and the firm was under no obligation to monitor ARM and, indeed, “without proper cause”, to question their integrity or professionalism.