Pensions  

IFA must compensate client for Sipp biofuel

IFA must compensate client for Sipp biofuel

Fos has upheld a complaint involving an IFA firm failing to assess the risks associated with a self-invested personal pension.

The complainant, referred to in the decision notice as Mr G, came across an investment website operated by Sustainable AgroEnergy plc, part of the Sustainable Growth Group (SGG) about a green oil fund, and completed a form to reserve an investment using a Sipp.

The investment firm then introduced Mr G to DeMontfort Wealth Management.

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DeMontfort then provided a document setting out the service it would provide that was to recommend a suitable Sipp product. The document made it clear no advice would be provided about the suitability of the Sipp or any investments made in that Sipp.

Mr G also signed another document from DeMontfort headed ‘terms of engagement’. Mr G said he ticked the full review option on the form, indicating he required full advice as he was concerned about the decision he was making. However, DeMontfort has claimed this document was completed in error.

It also claimed one of its advisers called Mr G and explained the risks involved with this type of transaction and that Mr G told them he was an experienced investor. Mr G said he did not remember this conversation.

He transferred £13,669 to the Sipp, with charges in the first year coming to £750, which represented 5.48 per cent of the total value.

Additionally, the ongoing charge of £450 represented 3.3 per cent of the fund value.

Ombudsman Roy Milne stated the investment with SGG was unregulated and that it was clear from the facts the Sipp was unsuitable for Mr G and the fund value transferred was not big enough to overcome the effects of the charges without significant risk.

Additionally, he said if Mr G had received suitable advice he would not have started the Sipp.

“I think it must have been worrying for Mr G to lose all of his pension fund,” Mr Milne said, and he suggested that a payment of £300 was fair in this case.

In terms of the compensation payable by DeMontfort, he added that the intermediary must pay the difference between the fair value and the actual value of the investment, and that if the actual value is greater than the fair value, no compensation is payable.

Additionally DeMontfort is obliged to pay any interest.

ruth.gillbe@ft.com