Petra complained about advice given to her by a regulated independent financial adviser to switch her personal pension plan to a self-invested personal pension (SIPP) and invest in high-risk unregulated collective investment schemes (UCIS).
What happened
Petra complained about advice given to her by a regulated independent financial adviser to switch her personal pension plan to a self-invested personal pension (SIPP) and invest in high-risk unregulated collective investment schemes (UCIS).
Petra felt the investments were too high-risk and should not have been recommended to her as an inexperienced investor. The investments failed, meaning she lost the value of the majority of her pension savings.
The firm which gave the advice did not uphold Petra’s complaint. It said Petra wanted to take tax-free cash from her personal pension plan and would not have been able to do this without transferring it, but it didn’t address Petra’s argument that the investments it recommended were unsuitable.
What we said
UCIS are specialist, high-risk investments which are not usually suitable for the general public, apart from experienced or high net worth investors. Even where they are suitable, the industry regulator has said it is generally good practice to limit UCIS to three to five percent of the investment portfolio. Petra was not an experienced or high net worth investor. Her attitude to risk was cautious. And she had little in the way of retirement funds. Despite this, 90% of her funds had been invested in UCIS. We thought the UCIS investments exposed her retirement savings to more risk than she could afford, or wanted, to take.
The firm also failed to consider alternatives to the expensive SIPP that had been selected.
Taking everything into account, we felt the recommendation was unsuitable. We upheld Petra’s complaint and told the firm to put her as closely as possible into the position she would have been in were it not for the unsuitable advice. We told the firm to carry out a redress calculation, and as we could not definitively say how Petra would have invested had she been given suitable advice, we asked the firm to use a benchmark based on an investment strategy that was in line with her ‘low risk tolerance’. We also recognised the loss of Petra’s pension fund when the investments failed, caused her distress, so we asked the firm to pay Petra £300 compensation for this.