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Liberty Sipp directors blame CMCs for company's failure

Liberty Sipp directors blame CMCs for company's failure

Directors of collapsed self-invested personal pension provider Liberty Sipp have said claims management companies were partly to blame for its downfall, after their pursuit of claims led to the company losing business.

In a statement from the Sipp provider’s administrators, published on Companies House this week (June 29), Liberty Sipp directors said the company was on the receiving end of a "sustained campaign in the press" prior to entering administration.

The directors said this damaged the provider’s reputation and, despite having the support of a number of IFAs, led to a gradual drop-off in sales. This, combined with their concerns over the then-pending outcome of the Carey Pensions court case, prompted them to seek a sale of the company.

In 2018 the Financial Ombudsman Service said it had received just over 500 complaints about Liberty from clients who had allegedly lost money after making high-risk investments.  

The Companies House report, from administrators Leonard Curtis Business Rescue and Recovery, also outlined other problems facing the company in advance of its collapse.

It explained how the provider launched its Options Sipp in 2013, which saw its client base grow to more than 13,000 with assets of more than £3.5bn.

But after this the issue of whether Sipp clients were responsible for their own investment choices came under scrutiny, and the Fos and Pensions Ombudsman "changed their view", in the words of the report.

The directors also believed there was a change in the behaviour of CMCs, who subsequently sought to hold Sipp providers responsible for the investment choices of clients, after which point the firm began to receive more complaints.

Due to the number of claims it received, Liberty Sipp was advised to enter administration in April.

Prior to this, a number of solicitors issued proceedings on behalf of clients in respect of potential claims relating to non-standard investments.

Liberty Sipp has instructed solicitors Reynolds Porter Chamberlain to continue to defend the claims. A trial is scheduled for September 2020.

Separately, four Fos complaints had been dealt with prior to administration. Following the firm’s collapse, the administrators wrote to 2,903 clients who had made complaints or were potential claimants to make them aware of their position.

The Financial Services Compensation Scheme is now accepting claims against the firm.  

According to the statement, in March 2018 Liberty Sipp had a turnover of £2.9m and profit of £371,000. 

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.

Following this, the company saw turnover drop to £1.5m and recorded a loss of £346,000 in for the period ended September 2019.

The management accounts for the period ended March 31, 2020 saw turnover reduced to nil, and losses of £95,000 were recorded as the provider continued to defend legal proceedings brought against it.