SIPPs RISK WHOS RESPONSIBLE? GINES ROMERO / SHUTTERSTOCK Apparently conflicting decisions by the Pensions Ombudsman Service and Financial Ombudsman Service have created uncertainly about who is responsible when SIPPs investments go wrong. Rachael Healey explains the implications S elf-invested personal pensions (SIPPs) allow members control over their pension investments that would not otherwise be available in final salary or defined contribution schemes. But who is responsible if the investment within a SIPP turns sour? The position is far from clear, following contradictory decisions from the Pensions Ombudsman Service and Financial Ombudsman Service (FOS) on strikingly similar facts. Contrasting decisions Before FOS, Mr A made a complaint against Berkeley Burke acting as administrator of a SIPP in relation to the investment of his entire pension in the esoteric product, sustainable agro-energies (SAE). Mr A was advised by an unregulated agent to transfer his pension monies to a SIPP so he could invest in SAE. Before the Pensions Ombudsman, Mr B made a complaint against Berkeley Burke, this time acting as trustee of a SIPP. Mr B applied to open a SIPP with Berkeley Burke on the advice of a regulated adviser. Mr B invested 82,695, split between investments in Green Oil Plantations and Harlequin Property. In both cases, Mr A and Mr B: (1) agreed to indemnify Berkeley Burke for any losses or liabilities; (2) confirmed that they understood that their investment was high risk and were told to take independent advice; and (3) confirmed that Berkeley Burke had not provided any advice. In both cases, the respective ombudsman considered the impact of the Financial Conduct Authoritys (FCA) guidance in September 2009, which broadly found that those involved with SIPPs should do more to ensure that investments in SIPPs were both proper and appropriate for the consumer. FOS upheld Mr As complaint. Although accepting that the contractual documentation did not require Berkeley Burke to review or advise on the investment, FOS found that the FCAs September 2009 guidance placed an obligation on Berkeley Burke to establish whether or not the investment was suitable for Mr A given: (1) the esoteric and unusual nature of the investment; and (2) that Mr A was introduced by an unregulated intermediary. However, the Pensions Ombudsman rejected Mr Bs complaint, finding that Berkeley Burke did not owe a duty of care to consider the appropriateness of the investments, and that this was clear from the contractual documentation. The Pensions Ombudsman considered the FCAs September 2009 guidance but concluded that its recommendations did not apply, as Mr B had agreed to make the specific investments without any advice. Berkeley Burke did all it was required to do, ensuring that the investments qualified within HMRC rules for investment within a SIPP. In an unprecedented move, FOS subsequently withdrew the decision from its website, saying it was reviewing it. The result.of that review is currently awaited. Lessons for risk managers There are striking similarities between the factual circumstances of the two complaints, and these competing decisions leave SIPP trustees and administrators in a difficult position. Despite the arguable strength of the contractual documentation Berkeley Burke required Mr A to sign, FOS did not consider this made much if any difference to its standard of care, whereas before the Pensions Ombudsman, the contractual limitations were fully upheld. Although it is worth mentioning that the Pensions Ombudsman follows the law, whereas FOS looks at what is fair and reasonable, these decisions leave those involved with SIPPs (and arguably pensions more generally) in a position that is far from clear. Subject to the result of the FOS review of its final decision in Mr As case, those involved with SIPPs could face the lottery of varying liabilities, dependent upon the forum in which a complaint is heard. Rachael Healey is a senior associate in leading City law firm RPC rachael.healey@ rpc.co.uk