Tenet to pay up over SIPP transfer that funded loan

Claire Tyrrell reports...

Advice network TenetConnect Services has been told to compensate a client it advised to release pension funds to finance a loan.

Mr P complained about advice he received from an appointed representative of Tenet, Impact Financial Solutions (IFS), to move his pension funds to a self-invested personal pension (SIPP) and buy certain shares so he could obtain a loan. As a result, Mr P incurred financial losses.

Mr P was referred to an IFS adviser in 2011 when he approached loan provider Breatheasy Loans, who offered to lend him £50,000 against his pension.

The adviser told Mr P to switch his existing personal pension to a SIPP and then buy shares in SVS Securities and Titania Internet Ventures to secure a loan to fund a charge taken out on his house by his ex-partner.

After he switched his pension into a SIPP, Mr P invested close to £92,000 in Titania Internet Ventures and around £94,000 in SVS Securities PLC on 22 December 2011.

According to the Financial Ombudsman Service these shares were “high risk investments” and that there was “nothing in Mr P’s background or history of investing which would indicate this kind of speculative high-risk investment was suitable for him”.

Mr P complained to Tenet that he was not given a choice of what shares to buy. The firm did not uphold his complaint, saying that it was not responsible for the actions of its adviser or IFS in respect of the matters Mr P complained about.

Mr P then complained to the ombudsman, and Tenet argued the matter was not within the ombudsman’s jurisdiction. The firm did not deny that Mr P was advised to invest out of his pension but said the decision to invest in certain shares was carried out by both Mr P and IFS.

However, the ombudsman found Mr P received correspondence from an IFS intermediary advising him to invest in particular shares. The ombudsman said: “In addition, placing so much of his pension, which was the majority of his overall savings, was entirely unsuitable and placed his financial security in retirement at serious risk. This investment approach was entirely unsuitable for him.”

The ombudsman issued a provisional decision on 11 September 2019 and reinstated this on 9 October, upholding Mr P’s complaint that he suffered significant losses as a result of IFS’ advice.

The ombudsman said while it would be complicated to try and put Mr P back in the position he was before he transferred out of his pension, Tenet should obtain the notional transfer value of the amount of Mr P’s pension had he not transferred to the SIPP, obtain the transfer value of the amount of Mr P’s SIPP represented by the amount switched to it in 2011, and pay these amounts into My P’s SIPP – minus the loan amount.

It is understood that Mr P would not have to pay the loan (of £55,476) back he received as a result of his pension switch, because repayment was conditional on the performance of the investments. The ombudsman also said Tenet should also pay any future fees owed to Mr P by the SIPP for the next five years, if the shares cannot be sold, and pay Mr P £500 for his trouble and upset.

Tenet declined to comment.