Providers of self-invested personal pensions (Sipps) have been told they need to take more responsibility when accepting business from clients, else they will find themselves at the mercy of the Financial Ombudsman Service.
Speaking at the third Great Pensions Debate at the Royal Air Force Museum in Hendon today (7 November), Philippa Hann, solicitor at Clarke Willmott who is leading litigation action on behalf of British Steel workers, told providers they could not blindly accept business but had a role to act as gatekeeper.
Ms Hann said: "It is time for Sipp providers to take responsibility, they are not simply a bucket into which a pile of crap can be poured.
"They are part of the gate keepers to ensure that people don't cause themselves harm. Where I see the problems is where people have been cold called and [...] they have very little in the way of pension provisions, and inevitably cause themselves damage.
"People should be able to invest in what they want, but there has to be responsibility for the people making money along the way."
Ms Hann pointed to the recent Berkeley Burke decision, when Mr Justice Jacobs found a Sipp provider could not rely on a perceived duty to carry out business as requested by the client, without considering the outcome for the client in line with FCA client protection rules.
She predicted the ruling, which Berkeley Burke is seeking to appeal, would inspire an increased amount of Sipp provider complaints to the Fos.
FTAdviser reported this week (7 November) the Fos has already received 1,000 complaints relating to Sipp due diligence this calendar year.
Berkeley Burke had argued it was bound to execute the instruction the client had given it, maintaining it had not given advice to the client and as such could not be held liable for the client's losses.
However, the court upheld the original decision from the Financial Ombudsman Service – that it does not make rulings on the basis of legal principles only, it makes decisions on what is fair and reasonable given the circumstances.
"And that is the problem that you face," Ms Hann said.
"The high level principles are not actionable in law and if someone breaches the high level principles, I can't bring court proceedings as a result.
"They will only inform what the rules say. There was no allegation in the Berkeley Burke case that it had breached any rules, therefore, if this case had simply gone through the courts as opposed to the Fos, I don't know whether the same decision would have been reached.
"So, you are faced with the unenviable position of the law of contract saying one thing, the regulator being able to overlay that – requiring you to act in a particular way where you don't have complete freedom of contract – and then you have the Fos, frankly doing whatever it wants.
"So i think it's a very unenviable position to be in... but there are steps that you can take; get your contracts in order and consider them properly at the beginning of every single relationship so that you are protected.