Self-Invested Personal Pension mis-selling represents one of the most damaging categories of financial mis-conduct of the past two decades. Thousands of savers were advised or induced to transfer pension funds — often final salary or occupational pension benefits built up over decades — into SIPPs holding high-risk, illiquid and frequently worthless unregulated investments. The legal framework is well-established, the regulatory position is clear, and the volume of unresolved claims remains substantial. For law firms instructing expert witnesses in SIPP mis-selling cases, understanding both the suitability assessment and the loss calculation methodology is essential to building a claim that will withstand scrutiny.
The Legal and Regulatory Framework
SIPP mis-selling claims proceed under two overlapping frameworks. The first is the FCA's Conduct of Business sourcebook (COBS), which imposes suitability obligations on regulated firms providing investment advice. Under COBS 9, a firm recommending a personal pension transfer or a specific investment must ensure that the recommendation is suitable for the individual client — taking into account their investment objectives, financial situation, knowledge and experience, and capacity for loss. A recommendation to transfer a defined benefit or occupational pension into a SIPP holding unregulated speculative investments will almost never be suitable for a retail client.
The second framework is the Financial Services and Markets Act 2000 (FSMA), under which a person who suffers loss as a result of a contravention of an FCA rule by an authorised person has a right of action for damages under section 138D. Where a regulated firm gave unsuitable advice in breach of COBS 9, the client has a direct statutory right of action. Where the advice was given by an unregulated introducer — as was frequently the case in SIPP mis-selling — the regulated SIPP operator or pension trustee may bear liability depending on the extent to which they facilitated the introduction and accepted the non-standard investment into the SIPP.
The Typical Fact Pattern
The SIPP mis-selling cases that Rivermead most commonly encounters follow a recognisable pattern. An unregulated introducer — frequently operating under a trading name with no obvious connection to financial services — contacts the client, often cold, with a proposition involving enhanced pension returns, tax efficiency or access to alternative assets. The introducer recommends a transfer from an existing pension — often a defined benefit scheme, a workplace pension or an earlier personal pension — into a SIPP. The SIPP is then used to invest in one or more unregulated, illiquid assets: overseas property developments, green energy projects, storage pod schemes, forestry, carbon credits or similar.
In many cases a regulated financial adviser is involved in the chain — either recommending the transfer, providing a letter of authority, or simply failing to advise against it. The regulated SIPP operator accepted the investment into the scheme, often in circumstances where a basic due diligence review would have revealed it to be entirely unsuitable for retail pension investors. The client loses some or all of their pension fund. The underlying investment proves worthless, illiquid or both.
The FCA has been clear since at least 2012 that this model was inappropriate. Its thematic review work, supervisory interventions and subsequent guidance on non-standard investments in SIPPs established that regulated firms facilitating transfers into SIPPs holding unregulated investments bore responsibility for the suitability of the overall arrangement — not merely the advice in their own narrow silo.
Suitability: The First Expert Question
The first function of the expert witness in a SIPP mis-selling case is the suitability assessment. This is an analysis of whether the advice given — to transfer the pension and invest in the specific assets held in the SIPP — met the standard required by COBS 9 at the time it was given. The suitability assessment is conducted by reference to the information that was, or should have been, available to the advising firm at the point of recommendation: the client's age, income, existing pension provision, investment objectives, risk tolerance, capacity for loss, and knowledge and experience of the type of investment being recommended.
For the vast majority of SIPP mis-selling cases, the suitability conclusion is straightforward. A retail client with limited investment knowledge, a long-standing defined benefit pension, and no capacity to absorb a total loss of pension savings is not a suitable recipient of advice to transfer into a SIPP holding illiquid overseas property or speculative green energy bonds. The expert's role is to document that analysis by reference to the applicable COBS standards and the specific client profile, producing an opinion that will withstand cross-examination in proceedings.
Where the advice was given by an unregulated introducer, the suitability assessment must address the regulatory position of the introducer and the extent to which any regulated firm in the chain — the adviser, the SIPP operator, or both — bears responsibility for the suitability failure. This is often the most contentious aspect of the liability analysis in SIPP cases.
Loss Calculation: The Comparator Portfolio Approach
The second function of the expert is the loss calculation. The measure of loss in a SIPP mis-selling case is the difference between the position the client is actually in — having transferred into the SIPP and invested in the unsuitable assets — and the position they would have been in had the mis-selling not occurred. Establishing that counterfactual position is the core of the loss calculation exercise.
The standard approach is the comparator portfolio methodology. The expert identifies what the client's pension fund would have been invested in absent the mis-selling advice — typically the existing defined benefit scheme, the previous personal pension, or a suitable alternative investment appropriate to the client's risk profile — and calculates what that fund would be worth today, taking into account investment growth, charges, and any pension income that would have been drawn. The loss is the difference between that comparator value and the actual current value of the SIPP.
The comparator portfolio must be appropriate to the individual client. A conservative retail investor with a low risk tolerance is not compared against an equity growth portfolio — the comparator reflects what a suitably advised client in their position would have held. Where the client transferred from a defined benefit scheme, the value of the lost defined benefit entitlement — including the guaranteed income stream, spouse's pension and inflation protection — must be properly quantified. This is a specialist actuarial and financial analysis that requires care and expertise.
Where the SIPP investment has some residual value, that value is credited against the loss. Where the client has received any distributions or income from the SIPP, those are also taken into account. The expert must also consider the tax position — pension transfers and SIPP investments carry specific tax treatments, and the loss calculation must be presented on a basis that correctly reflects the client's actual net position.
The SIPP Operator's Liability
A significant feature of many SIPP mis-selling cases is the potential liability of the SIPP operator — the regulated firm that established and administered the SIPP and accepted the non-standard investment. The FCA's position, confirmed in its 2012 thematic review and subsequent guidance, is that SIPP operators bear responsibility for carrying out appropriate due diligence on non-standard investments accepted into their schemes. Where a SIPP operator accepted an investment that was clearly unsuitable for retail pension investors — illiquid, unregulated, high-risk, with no credible independent valuation — without carrying out adequate due diligence, the operator may bear direct liability to the client, even where the operator did not itself provide investment advice.
This is an important route to recovery in cases where the original advising firm has since become insolvent or ceased trading — as is common in this sector. The SIPP operator, as a regulated firm that remained in business and continued to administer the scheme, provides a solvent defendant against whom a claim can be maintained. The expert's assessment of the operator's due diligence failings is a critical part of the liability analysis in operator liability cases.
What Law Firms Should Do Now
- Obtain the full client file from the advising firm and SIPP operator via DSAR — including all suitability documentation, know-your-client records, and due diligence carried out on the underlying investment
- Identify every regulated firm in the chain — adviser, introducer, SIPP operator — and assess the liability position of each
- Obtain a current valuation of the SIPP and its underlying investments — many non-standard investments are now wholly illiquid and require specialist valuation
- Instruct an expert to carry out both the suitability assessment and the comparator portfolio loss calculation — these are distinct exercises but must be addressed in a single coherent report
- Where the original adviser is insolvent, consider the SIPP operator liability route and the Financial Services Compensation Scheme (FSCS) as alternative or parallel routes to recovery
- Consider limitation — the six-year period runs from the date of advice, but where the client did not discover the loss until later, the three-year period from date of knowledge under the Limitation Act 1980 may apply
Rivermead's Approach
The Rivermead Partnership provides expert witness reports in SIPP mis-selling cases covering both the suitability assessment — analysing whether the advice met the COBS 9 standard by reference to the client's profile and the applicable regulatory requirements at the time — and the loss calculation, applying the comparator portfolio methodology to establish the difference between the client's actual position and the position they would have been in had suitable advice been given. We work with law firms acting for claimants in both adviser liability and SIPP operator liability cases, and can provide reports suitable for FOS complaints, arbitration and court proceedings.
If you have SIPP mis-selling cases you wish to discuss, or instructions to place, please request a call back and we will be happy to advise.