Personal Pension  

Ombudsman backs Sipp provider’s compensation offer

Ombudsman backs Sipp provider’s compensation offer

The Pensions Ombudsman has not upheld a complaint made against the IPS self invested personal pension as the provider has offered complainant Clive Darlaston an equitable compensation package to address the finanical loss to him as a result of its errors.

Mr Darlaston complained that IPS, trading as the James Hay Partnership, failed to keep accurate records of three overseas property investment deposits held in the Sipp, and that consequently they overvalued the Sipp fund for the purposes of calculating the retirement benefits available to him.

The Sipp was established in May 2005, and Mr Darlaston and IPS are its co-trustees.

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IPS is also the Sipp administrator accountable for recording details of the Sipp assets and the movement of monies to and from the Sipp bank account.

Mr Darlaston is responsible for providing them with accurate values for these assets and transactions. All Sipp investments, payments and loans must be authorised by both IPS and Mr Darlaston.

He alleged that IPS incorrectly treated the £70,000 which he paid into the Sipp in March 2007 as a personal contribution instead of a partial payment to cover the cost (£110,799) of assigning the Sipp interest in one of the properties to him.

Mr Darlaston also alleged that IPS subsequently claimed income tax relief of £19,744 on this payment by mistake; effectively loaning him £40,799 from the Sipp, without any interest due, until he paid this amount into the Sipp some seven years later.

He complained IPS also failed to notify him at any time that he had to repay this ‘loan’.

Additionally, he alleged that IPS overpaid the amount of tax free cash available to him from the Sipp by £20,031 in April 2008, which HM Revenue and Customs will treat as an unauthorised payment if it is not repaid.

He said IPS also failed to carry out his request to transfer the residual Sipp fund to Hargreaves Lansdown on a timely basis.

IPS has admitted all these errors.

Although deputy pensions ombudsman Karen Johnston found that the mistakes made by IPS “clearly constitute maladministration”, she ruled the complaint will not be upheld as the provider has offered Mr Darlaston a compensation package.

The package will put Mr Darlaston back into the position he would have been if it had not made the mistakes.

Ms Johnston also found that IPS is entitled to seek recovery of the overpaid tax-free cash for reinvestment in the Sipp from Mr Darlaston.