Trustees could find themselves having to foot hefty compensation bills if they fail to ensure they have dealt with ALL the beneficiaries of a SIPP properly, warns SIPPs provider D A Phillips & Co.
Speaking to delegates at the ninth annual Henry Stewart Conference on SIPPs in London yesterday, director David Phillips called for caution when it comes to dealing with people investing in a SIPP.
Pointing towards the prospect of 'human' errors, Phillips said trustees have to make sure they have taken all the scheme beneficiaries into account when making a decision and not assume one member is acting for somebody else.
If not, they may breach the ‘duty of care’ rules, which include acting in the members' best interest, he said.
This could effectively give members an opportunity to appeal to the Pensions Ombudsman for compensation mounting to thousands of pounds, he added.
As an example, Phillips mentioned a case where a husband and wife had jointly purchased a property equally in their two SIPPs.
A year after the purchase, the couple decided to separate and the wife informed her provider. At the same, the administrator of the SIPPs - who were not the providers - corresponded with the couple and had conversation with the husband regarding a possible sale of the property.
Following this, the house was sold for just £130,000 and then re-sold within a month for £235,000 without the administrator making any contact with the wife regarding the sale or requiring a valuation of the property.
The wife took the case to the Pensions Ombudsman.
SIPPs are directed by the members and therefore the duties of the trustees are not as onerous as they might be in an occupational pension scheme. However, this does not hold true in this case, Phillips said.
"The argument does not succeed in this case however as the property sale was being directed by one member only and at no point did the administrators check matters with the other member.
"The trustees owed a duty of care to the beneficiaries including a requirement to act in the members best interest and obtain a reasonable sale price for the property," he explained.
As a result, the wife received £52,500 in compensation, which would have been her half share in the difference between the first and the second sale price. In addition, she also got an award for the distress experienced because of maladministration.IFAonline
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