In the ombudsman’s decision, the complainant, Mr A, argued that an “appointed representative (AR)” of Intrinsic Financial Planning advised him to transfer his personal pension to a Sipp.
After this transfer was made, Mr A invested the entire pot into Harlequin, which collapsed in October 2016.
No date was provided in the ombudsman’s decision about when the transfer was made. However, it is understood to have been during or before 2013.
Thousands of, mostly, British pensioners invested around £400m ($526m, €454m) into the unregulated scheme via UK financial advisers, which offered guaranteed returns of 10% from luxury villas.
Complaint upheld
An investigator for the ombudsman looked at Mr A’s complaint and advised that it should be upheld.
“From the declarations signed by Mr A, it was clear that the only advice the AR gave was to switch his personal pension to a Sipp.
“However, guidance from [the FCA] has made clear that in this situation, consideration must be given to the intended investment(s) to be held within the Sipp. If the intended investments are unsuitable, then so is the Sipp advice,” the investigator said.
The ombudsman said it was clear from the suitability report for the Sipp, that the adviser knew that Mr A intended to invest in Harlequin.
“For these reasons, the investigator concluded that the advice Mr A received was unsuitable,” the ombudsman said.
Intrinsic did not agree with this ruling and said Mr A did not receive advice about Harlequin from its AR. Additionally, it argued it has no relationship with either Harlequin or the agent responsible for Mr A’s investment in the scheme.
The ombudsman said while he was satisfied that Intrinsic’s adviser did not give specific advice about Harlequin, they should have advised Mr A against the transaction.
“I consider the adviser could have given general advice about the advisability of investing all of an investor’s pension provision in a single unregulated investment.
“In my view, the adviser could and should have advised against the transaction without straying into giving regulated investment advice about Harlequin,” the ombudsman said.
Compensation
In determining compensation, the ombudsman aimed to put Mr A as close to the position he would have been in had he note been given unsuitable advice.
To achieve this position, the ombudsman said Intrinsic should:
- Obtain the [current] notional transfer value of Mr A’s previous pension plan, as if it had not been transferred to the Sipp.
- Obtain the [current] transfer value of Mr A’s Sipp, including any outstanding charges.
- And then pay an amount into Mr A’s Sipp so that the transfer value is increased to the amount at stage two. This payment should take account of any available tax relief and the effect of charges.
- Pay any future fees owed by Mr A to the Sipp, for the next five years.
- Pay Mr A £500 for the trouble and upset caused.
