Liberty Sipp has been ordered by the Pensions Ombudsman to pay out more than £18,500 to its client after it found the now defunct provider did not carry out enough due diligence checks before allowing a pension transfer into a dodgy Ssas.
The ombudsman said the provider had a duty to protect the interests of its clients and should have carried out adequate due diligence and provided warnings to the client before allowing him to transfer his pension.
Problems first arose in March 2017 when Mr E submitted a request to Liberty Sipp to transfer the full value of his £97,100 Sipp to the Dawson Metals Retirement Benefits Scheme, a small self-administered scheme (Ssas).
However, he later changed his request so that he would only transfer £18,500 of his Sipp into the Dawson scheme and Liberty Sipp carried out the transfer shortly after.
But Mr E soon had concerns that his money had been lost or misappropriated by the new scheme and complained to Liberty Sipp for failing to put in place the necessary procedures to reflect industry guidance on pension fraud.
He called on the provider to put him back into the position he would be in if the transfer hadn’t occurred.
But Liberty Sipp said it had carried out all the usual checks, guaranteed the scheme was registered with HM Revenue & Customs and found “nothing out of the ordinary” with the transfer to the Ssas.
An adjudicator at the ombudsman concluded further action was required by Liberty Sipp.
There were enough risk factors for Mr E to have been dissuaded from transferringThe PO said while Liberty Sipp had obtained the necessary documentation of the Ssas it had not carried out any due diligence on the employer sponsor or the connection with Mr E.
The adjudicator said: “Although Liberty could to give advice about the transfer it could have given warnings to Mr E and, if necessary, delayed the transfer until it obtained further information.”
The Pension Regulator’s guidance, published in February 2013, states providers should establish the client’s level of understanding of the type of scheme they will be transferring into and should direct them to The Pensions Advisory Service for any questions they may have.
But Liberty had not contacted Mr E and simply progressed the transfer into the Dawson scheme.
Red flags
The ombudsman stated that at the time of Mr E’s transfer, the scheme was registered with HMRC and able to accept transfers.
Even if Liberty Sipp had carried out full due diligence it would not have been able to categorically state that it was being used as a scam vehicle, according to the ombudsman.
But, there were enough risk factors for Mr E to have been dissuaded from transferring, it added.
Liberty Sipp disagreed stating there were “no red flags” as there was nothing to suggest Mr E had been approached unsolicited.
Ombudsman Anthony Arter concluded Liberty Sipp should have been aware of the increasing level of pension scams at the time of the transfer saying it was disappointing it had been so “unaware of the requirements placed on it to protect the interests of its customers”.
Mr Arter found the Ssas was registered to Dawson Metals based in Romford, whereas Mr E lived in Hereford, something which Liberty Sipp should have questioned.
Another red flag was that the pensions administrator running the scheme was not authorised by the Financial Conduct Authority.
Mr Arter said: “It was Liberty’s responsibility to put Mr E in a position where he could make an informed decision and it failed to do so.”
Therefore he upheld Mr E’s complaint and ordered Liberty Sipp to pay £18,500 back into Mr E’s Sipp as well as compensate for any loss of investment opportunity.
In December 2018, TPR appointed Dalriada Trustees to take over the trusteeship of the Dawson scheme to see whether it could recover any of the monies lost.
Liberty Sipp entered administration last month (April 27) after it struggled to deal with a number of decisions against it from the Financial Ombudsman Service.
It is expected that hundreds of claims will now land at the Financial Services Compensation Scheme as affected clients seek up to £85,000 in redress.
The Liberty Sipp Limited business and customer assets were sold to EBS Pensions Limited, part of the Embark Group, in October 2018, which then rebranded the Liberty Sipp as the Option Sipp.
However, the legal entity Liberty Sipp Limited was not part of the sale and retained its liabilities. It consequently had to pay out against any complaints using the assets it held.
amy.austin@ft.com
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