This year could be very bad indeed if you manage self-invested personal pensions, largely due to a handful of decisions by the Financial Ombudsman Service.
There was a time when I took Fos decisions as gospel. Largely they were even-handed and fair. In the past few years though my trust in this system has been eroded, culminating in the Berkeley Burke decision in October.
Since then we have had a few other decisions upheld against Sipp providers. The floodgates have been opened. Google now throws up dozens of claims management companies ready to lodge complaints against Sipp managers.
It is the Berkeley Burke decision that vexes me the most.
Back in 2011, the company invested a client’s money into plots of agricultural land in Cambodia. The client had found the investment opportunity himself online. He then found an introducer who put him in touch with Berkeley Burke.
The Fos will end up regretting this decision. They are the ones who will be bombarded by vexatious claims from this utterly baffling decision.Before accepting the unregulated execution-only investment, Berkeley Burke sent at least three letters to the client warning of the dangers.
The client had to send back a signed letter saying he acknowledged the risks. The investment bombed (of course) and so the client complained.
In 2014, the Fos ruled against Berkeley Burke for failing to carry out adequate due diligence on the £29,000 unregulated collective investment scheme. In October, the High Court ruled that the Fos decision was lawfully made. An appeal beckons.
So what exactly has Berkeley Burke done wrong here?
The Fos believes that as the trustee of the Sipp, Berkeley Burke should have checked the investment.
But that overlooks the fact that the client was the other trustee on the Sipp – where is his responsibility? And if all trustees are supposed to oversee every single investment in this way, what implications does this have for the role of trusteeship in general?
In 2011 it was perfectly acceptable to make this execution-only unregulated investment. Berkeley Burke did not cold call the client, it had no sales role, it confirmed with the client several times that this was an unadvised sale and risky.
In some of the other Fos cases against Sipp companies there has been a sales process – often a cold call.
That is a different matter. And we know there have been rogue elements in this industry. I would feel very differently about this case if Berkeley Burke had been involved in a sales process, but it was only providing a wrapper for the investment.
The whole point of Sipps was to allow these types of investment. This Sipp cost £250 and had a 1 per cent annual admin charge – that is hardly profiteering.
Regular readers of this column know that I am generally very pro-consumer, but that does not mean individuals can wash their hands of all personal responsibility.
So now we have a situation where claims handlers are rubbing their hands with glee.
The Fos will end up regretting this decision. They are the ones who will be bombarded by vexatious claims from this utterly baffling decision.
Not a happy new year
I am utterly convinced 2019 is going to be extraordinarily bleak – and not because of Brexit.
Our personal savings levels are at record lows, credit card spending is smashing all records, the high street looks very gloomy, and if you read the latest Royal Institution of Chartered Surveyors report, surveyors are battening down the hatches for a housing market standstill.
Add in the fact that we have rising rates with the end of cheap money looking like it will call time on a 10-year stock market bull run, and you can see why I feel pessimistic.
So the question is: when to put your money in cash? Certainly that is a conversation I hear over and over again, but is it really one advisers are prepared to have with clients?
Better savings with cashback
One of the things that gives me great satisfaction is my annual new year cash-in. This is when Mrs Coney and I go through all our cashback and points schemes and put them all in a bank account or spend them – I realise I am intensely dull man.
By far the biggest perk is the Santander 123 account, which has paid £1,532 cashback since the account opened and we moved the mortgage to it.
Then there is British Airways Executive Club, which pays thousands of points a year – plus one free ticket in same class – when you spend on its credit card. I love cashback websites too, such as Quidco (£160 last year).
It proves there really is such a thing as a free lunch, if you shop wisely.
James Coney is money editor at The Sunday Times
