In 2012 Lorry Driver Russell Adams was down on his luck. His bank, the HSBC, had decided to call in his £170,000 mortgage on his £380,000 home. Desperate to raise money he thought of cashing in his frozen £52,000 private pension from Friends Life. He spotted an ad “‘release some cash from your pension” and was directed to CLP Brokers.
A friendly man called Ben Shepherd, told him “I could transfer it into a pension that would perform better and allow me to invest in better investments. I did not know much, if anything, about pension investment at the time and trusted what CLP told me.”
Since the transaction was going to be handled by a reputable private pension management provider then called Carey Pensions UK ( now Options UK Personal Pensions) he was reassured.
He was directed to invest in Store First, a Blackburn based storage facility, that made its money letting out what are known as store pods to people.
Mr Adams told the court that Ben was very keen on this because it was property and he made it sound safe and good for me. He then took out an execution only SIPP with Carey to include his investment. Ben was on commission for putting business that way.
What he didn’t know that CLP, based in Spain, was not authorised by UK law to give any financial advice. It was run by Terence Wright and Lesley Wright. Although Carey was unaware of this until May 2012, the Financial Conduct Authority had posted a warning notice in respect of Mr Wright in 2010. The notice warned that Mr Wright was not authorised under Financial Services and Markets Act to carry on a regulated activity in the United Kingdom, explaining that it believed that he “may be targeting UK customers via the firm Cash In Your Pension”.
Worse was to come. Store First was a dud – it hardly made a penny and Mr Adam’s investment was worthless.
So Mr Adams went to court. At the first hearing the judge found for the private pensions industry and exonerated Carey Pensions for any liability of managing an investment run by a guy barred from trading in the UK.
But last Thursday the Court of Appeal overturned much of the ruling saying Mr Adams was entitled to his money back plus compensation and furthermore Carey Pensions now Options UK Personal Pensions – could not escape liability by trying to blame Mr Adams for his own misfortune. The pension firm tried to appeal to the Supreme Court but were blocked by the judges.
The judgement has widespread implications. For a start some 580 other people had been advised to invest in the firm Store First and could claim their money back. The ruling also has wider implications in that your friendly private pension provider may well have to stop recommending you high risk investments by unregulated – or to be more frank- dodgy providers or risk the fate of Carey Pensions.
The judges in my view took the right decision. They said anymore with only £50,000 to invest is not a sophisticated investor and should be better protected than someone with a £1m to invest.
” Fresh opportunities for unscrupulous entities to target the gullible” -judge
Perhaps the comment from Lady Justice Andrews sums this up the best:
“As the unhappy history of the transfers of small personal pensions into SIPPs holding high risk investments related in that judgment illustrates, the liberalisation of the pension regime in 2006 brought with it fresh opportunities for unscrupulous entities to target the gullible, the greedy or the desperate.
“There is nothing to prevent a regulated SIPP provider such as Carey from accepting instructions from clients recommended to it by an unregulated person, and from doing so on an “execution only” basis. But the basis on which they contract with their clients will only go so far to protect them from liability. If they accept business from the likes of CLP, they run the risk of being exposed to liability under s.27 of the FSMA.”