SIPP  

Claimant awarded maximum amount in 2002 Ucis advice case

Claimant awarded maximum amount in 2002 Ucis advice case

The Financial Ombudsman Service has ordered an adviser to pay his client the maximum compensation amount of £150,000, after giving unsuitable advice to invest the majority of his pension fund into a Ucis.

The client, who the Fos called Mr E, complained about advice he was given by Stuart Binns & Associates to invest a large part of his self-invested personal pension in a high-risk and highly geared commercial property portfolio.

As Mr E has since passed away, his complaint is now being handled by his son on behalf of both his father and mother, who is the sole beneficiary of the Sipp.

The Fos agreed the adviser had given unsuitable advice and that Mr E would have invested differently had he been aware of all the risks.

It awarded the claimant the maximum sum of £150,000 cautioning him to seek legal advice in case there is more to be gained. 

From 1 April, Fos's limit increased to £350,000 but only for complaints about actions by firms after that date.

The problem first arose in 2002 when Stuart Binns advised Mr E to transfer his four personal pension plans into a Sipp, with Mr E acting as trustee.

After taking his tax-free cash Mr E was advised by the firm to invest the remaining money in three funds operated by Close Property Investment.

As such, £100,000 was invested in the Healthcare and Leisure Property Fund (HLP);  £100,000 in the Capital Appreciation Trust (CAT); and £200,000 was placed in the Active Commercial Estates Trust (ACE).

In 2006, Stuart Binns wrote to Mr E explaining the HLP fund was slow to perform so it recommended Mr E switch to a Close Property Investment Portfolio fund. 

It also explained that the board of the CAT fund had decided to sell and that the funds would be available for reinvestment shortly. They were disinvested in December 2006. The ACE fund was retained.

Stuart Binns had advised Mr E in 2006 that he should have a complete review of the asset allocation. It suggested management of the fund by a DFM and it recommended Firm S, having earlier advised Mr E that it was no longer the job of an IFA to manage client investments; this should fall to a DFM.

It was also agreed he would switch to another Sipp provider with lower costs.

As a result, the HLP fund was encashed on October 26, 2007 and the ACE assets were re-registered to the new Sipp provider in November 2007.

But by January 2008 the ACE fund was suspended. 

Mr E decided to file a complaint with the Fos against both the DFM and Stuart Binns.

The complaint against the DFM was deemed to have been made too late under Fos rules and so could not be considered but there was evidence that Mr E had initially raised concerns about the advice he received in 2010, within three years of the ACE fund being suspended, therefore this claim was deemed within time.

In the case against the adviser the adjudicator concluded that it was not suitable for a large part of Mr E’s pension to have been invested in the property funds as this was not in line with the cautious approach he wanted to take.