spofforths warn on mis-selling of SIPPs

Owners of commercial property should be extremely careful if they are recommended to transfer their assets into a self invested pension plan (SIPP).

Spofforths, one of the largest firms of chartered accountants in Sussex, says that there has been a bout of mis-selling these financial products. Philip Wise, managing director of Spofforths Financial Planning Ltd, says that a group of his clients have reported that banks and insurers have tried to sell SIPPs to them when they weren’t suitable.

‘SIPPs are useful in specific circumstances,’ he says. ‘But they do not fit every case. So you need to be clear what the advantages and disadvantages of SIPPs are. My clients have told me of a range of circumstances where financial services groups have attempted to sell SIPPs to them. In each of these cases, SIPPs were not appropriate.’

He says the worst case was a bank which had already granted a mortgage of £140,000 on a property worth £150,000. The same bank was recommending that it set up a SIPP for the client into which the property could be placed. But there were insufficient funds in the SIPP to repay the existing lending.

‘It was only when we told him that the transaction could not be done that he understood for the first time that the bank had attempted to mis-sell a SIPP to him.’

Wise continues: ‘There are upsides and downsides to SIPPs and potential users should be clear what they are. Costs are a good example. You may be told that there is an annual fee. Some SIPP providers charge around £500 but others as much as three times that. There are also hidden costs and charges which can be substantial. It is important to seek independent advice from a reputable adviser.’

For more information, please contact:
Kay Reynolds Phase8Media 020 8778 8357

Date:16 April 2007