Thorough investigation required for Self-Invested Personal Pension (SIPP) evaluation, Mentioned by Pensions Ombudsman

In a recent decision, the Pensions Ombudsman (PO) has dismissed a complaint by a private investor, Ms R, regarding her Self-Invested Personal Pension (SIPP) provider's due diligence when she invested £120,000 in a loan note issued by Renewable Land Resources Ltd (RLR).

The SIPP provider, acting on an "execution only" basis, facilitated Ms R's investment decision. As a high-net-worth investor, Ms R was responsible for making investment decisions in relation to her SIPP. The provider ensured that the contractual arrangements with RLR were legally enforceable and correctly drawn up.

The SIPP operator conducted extensive due diligence checks on the RLR loan notes between 2016 and 2019. These checks were found to satisfy the standards set out in a CEO letter from the Financial Conduct Authority. The checks were also carried out by external financial and legal advisors.

Ms R's initial investment with RLR was made in March 2017, and she invested an additional £120,000 in another loan issued by RLR in September 2019. However, the loan note issued by RLR defaulted, and Ms R lost the majority of its value, reducing her investment to £20,376.

In September 2019, RLR suspended interest payments and capital redemptions for loan notes to allow restructuring. In June 2019, Companies House issued a 'First Gazette Notice' for RLR due to overdue accounts.

Ms R also complained about the high fees charged by her SIPP provider following the default. In response, the PO found that the fees were within the normal range for such services and were clearly explained in the SIPP's terms and conditions.

The PO's ruling states that there was no maladministration by the SIPP provider in its role as trustee or SIPP operator. This decision follows a claim for fraud submitted to the High Court in January 2021 by other investors against Ms R's financial adviser and RLR.

In a separate development, Ms R's financial adviser went into liquidation in September 2020.

The SIPP operator also verified that Ms R's confirmation that she was a high-net-worth individual and/or sophisticated investor was correct. The operator also ensured, as far as possible, that the contractual arrangements with RLR were legally enforceable and correctly drawn up.

The PO's decision highlights the importance of investors understanding the risks associated with high-risk investments and the responsibilities of SIPP providers in facilitating such investments. It also underscores the need for investors to carry out their own due diligence when making investment decisions.

Thorough investigation required for Self-Invested Personal Pension (SIPP) evaluation, Mentioned by Pensions Ombudsman