Lawyers warn of £3.5m Lifetime Sipp claims to hit FSCS

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Lawyers warn of £3.5m Lifetime Sipp claims to hit FSCS

Tobias Haynes, a solicitor at FS Legal, which represents a group of claimants against the self-invested personal pension (Sipp) provider, said Lifetime was facing a number of claims related to Harlequin and other unregulated schemes.

FTAdviser revealed this morning (13 April) that the troubled provider has appointed Kingston Smith & Partners as joint administrators to try and salvage the firm.

Lifetime’s latest accounts showed the firm had total net assets worth £1.6m at the end of January 2017.

Mr Hayes said his legal firm alone represents about 70 clients with an estimated claims value of £3.5m in relation to Harlequin Property, but more claims related to other unregulated investments could be on the horizon.

A letter sent to creditors on 6 April stated a number of claims have been lodged with the company, some of which were referred to the Financial Ombudsman Service (Fos).

The Fos confirmed about 40 cases are open with it against the business.

Mr Hayes advised anyone who has got a claim to bring it to the attention of the administrators so it can be registered.

He said: “Lifetime follows in the wake of Brooklands, Montpelier and Stadia, which are now being dealt with by the FSCS.

"We anticipate Lifetime is likely to find itself in a similar position, with investors ultimately ending up at the FSCS.  

“Investors need to start thinking about taking action if they have invested through Lifetime Sipps, even if they have not received a letter from the administrators.”

If the FSCS deems a firm cannot meet the claims against it, it can declare it in default and start paying out on behalf of investors with legitimate claims.

FS Legal represents two groups of investors, one claiming Lifetime failed in its due diligence when accepting the investments in their Sipps and the other complaining about unfair Sipp fees.

The due diligence claim was due to be brought to the courts but has now been put on hold due to the administration process.

The Sipp fee claim has also been held until it becomes clear whether to bring it to the Fos or Pensions Ombudsman, Mr Hayes said.

Harlequin took about £400m from investors via UK financial advisers and promised ‘guaranteed returns’ of 10 per cent a year from luxury villas, which never came.

In 2013 Lifetime wrote to all of its clients with investments in Harlequin at the behest of the regulator, informing them the value of the investments has been written down to a nominal £1.

The FSCS paid out almost £100m in relation to advice to invest in Harlequin by March last year but it only recently started to act in relation to the Sipp firms themselves.

Because the lifeboat compensation fund has a limit of £50,000 per investment claim those compensated for bad advice could still seek to recover the difference between their investment loss and the compensation they were given.

On its website the firm says its core product, the Lifetime Sipp, is only available through regulated advisers on a fully advised basis.

In January this year the FSCS said it would compensate investors with claims against Brooklands Trustees, Stadia Trustees and Montpelier Pension Administration Services, which it declared in default.

Sipp provider due diligence and their responsibility towards investors has been a grey area, which is in the process of being picked apart.

In a case currently going through the courts fellow Sipp provider Carey Pensions stands accused of failing in its duty towards non-advised investors, where it is argued the provider could not rely on execution-only contracts to distance itself from its treating customers fairly duty.

carmen.reichman@ft.com