Petra lost money when she switched to a self-invested personal pension and invested in an unregulated collective investment scheme (UCIS).
What happened
Petra was advised by a financial firm to transfer her personal pension plan into a SIPP which invested in a UCIS. The investments failed, and a lot of her pension savings were lost.
Petra felt the risk of these investments was too high and they shouldn’t have been recommended to her as an inexperienced investor with a preference for low risks.
But the advice firm defended its recommendation. It said Petra wanted access to tax-free cash from her personal pension plan, which required a transfer.
However, Petra said the investments the adviser had recommended were unsuitable and it had not offered alternative options.
Unhappy with the advice firm’s response, she brought her complaint to us.
What we said
UCIS are specialist, higher-risk investments that aren’t usually suitable for everyday investors unless they are extremely experienced or wealthy.
Even for suitable investors, the industry regulator has suggested limiting UCIS to three to five per cent of the investment portfolio as best practice.
Petra wasn’t an experienced or high-net-worth investor. She had a low-risk attitude to investments, and she didn’t have much retirement money. Despite this, 90% of her funds were invested in UCIS.
We thought the UCIS investments exposed her retirement savings to more risk than she could afford or wanted to take. And the advice firm hadn’t told her about options other than the SIPP, which was more expensive than her previous arrangement.
Taking all this into account, we concluded the recommendation was unsuitable and upheld Petra’s complaint. We told the firm to put her as closely as possible into the position she’d have been in were it not for the advice. And we instructed them to carry out a redress calculation.
However, we couldn’t say how Petra would have invested had she been given different advice. So, we asked the firm to use a standard based on an investment strategy that matched her low risk tolerance.
We also recognised that losing most of her pension fund had caused her distress. So we also asked the advice firm to pay Petra £300 for this.