The parent company of Options Pensions, formerly known as Carey Pensions, has set aside £21.4mn to deal with possible similar cases after the Court of Appeal ruled against it earlier this month.
STM Group said in its full year results today (June 8) that although the case would not have a financial impact on the business, as it has “significant” professional indemnity protection, it has made the provision for similar cases.
STM Group is the parent company of Options Pensions which lost a case in the Supreme Court last month over provider responsibility when accepting investments.
The Supreme Court upheld the Court of Appeal’s ruling last year in favour of the claimant, Russell Adams, who had lost money after investing in high-risk, unregulated Store First through a self-invested personal pension.
In the statement today, the company hit out at the decision, saying the UK market remains in a “position of uncertainty” as to the extent of the duties of Sipp providers.
Chief executive officer of STM Group, Alan Kentish, said: “There remains uncertainty in the industry…[which has] resulted in increased costs such as professional indemnity insurance which are invariably passed on to the pension member.
“The outcome of the case is very fact specific, and there remains other areas of uncertainty around a Sipp administrator's duties that would benefit from additional clarity.”
The company said the ruling made in the Adams case was “specific” and the Court of Appeal did not determine the appropriate relief due to the claimant at the time of its ruling.
“It was therefore difficult to assess the exact obligation that could arise on other claims based on this one case.”
The £21.4mn is on top of £3.6mn ringfenced in the previous year’s accounts.
The company added that this amount is covered by professional indemnity insurance, so will sit on its balance sheet as a receivable due from insurers.
STM said the original case related to an investment made in 2012 - before its acquisition of Carey in February 2019.
It said a condition of the acquisition was the indemnity on any claims in the Adams v Carey case, with the benefit of "significant" existing PI cover held by the sellers.
Just over a year ago, the Financial Ombudsman Service had 592 open complaints against Options UK Personal Pensions.
Carey originally won the case, with claims against the Sipp provider being dismissed on all grounds in May 2020.
But in a Court of Appeal decision last year, judges found Adams had been advised, in contravention of the Financial Services and Markets Act 2000, by CLP Brokers, an unregulated introducer.
The court said at no time was CLP authorised by the Financial Conduct Authority to give investment advice or to make arrangements relating to investments.
It therefore declared that because the Sipp was entered into as a consequence of CLP’s actions, the Sipp agreement was unenforceable against Adams, and he was therefore entitled to ‘unwind’ it and recover the money he paid into it, as well as compensation to reflect the losses he has suffered as a consequence.