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Excessive due diligence not expected of UK Sipp providers

The UK’s Pensions Ombudsman has found in favour of Sipp providers in a case where a client made non-regulated investments without seeking financial advice.

Excessive due diligence not expected of UK Sipp providers


Ombudsman Anthony Arter argued that the Sipp provider should not be expected to carry out extensive due diligence into the suitability of investments chosen by the client.

The original complaint was lodged by ‘Mr N’, who in 2012 ploughed nearly £150,000 ($215,558, €190,447) of his Sipp into high-risk investments, accusing provider Stadia Trustees of not carrying out “sufficient” due diligence.

Mr N initially opened the Sipp with Stadia in April 2012, admitting at the time that he had not sought or received financial advice. In July 2012, while completing a member investment instruction form, he acknowledged the investments – £144,000 in Australian Carbon Credits and £3,900 in African Land – were not regulated.

However, Mr N later claimed he did not fully understand the documents he was signing due to his lack of financial knowledge.

“In this instance I am satisfied that Stadia had provided Mr N with sufficient warning of the risks, and the option of a more diverse portfolio had been raised, and yet he continued with the investment

“The limit of Stadia’s responsibility as administrator is to consider whether or not an investment falls within the list permitted by HMRC. Whilst they can choose not to allow an investment even if it is permitted by HMRC, there is no requirement on them to do so,” said Arter.

Confused message

This latest ruling on the due diligence of Sipp providers may prove contentious. Last year, the UK-based Berkeley Berke lost a case with the Financial Ombudsman Service (FOS) over the failure to carry out adequate due diligence by allowing a customer to invest £24,195 in Green Oil Plantations in 2011 and £58,500 in Harlequin.

Considered a landmark ruling at the time that would require Sipp operators to undertake adviser-style checks – the decision was later reversed once fresh evidence came to light. 

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