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Pension savers who poured their life savings into a firm offering risky, unregulated investments can now lodge a claim with the industry lifeboat fund, after the company fell into administration.
Self-invested personal pension (Sipp) operator Berkeley Burke sold high-risk schemes to customers between 2010 and 2012. But after savers transferred their retirement funds, many of the investments became illiquid, meaning customers could not access their cash.
Customers subsequently launched a legal case against the provider, arguing it had not performed sufficient due diligence, and a court ruled in August that it must pay £1m to cover the legal costs incurred so far. However, the firm has now entered administration because it cannot afford to defend itself further.
The Financial Services Compensation Scheme (FSCS), which is a fund to compensate customers when a firm is unable to do so, said it will now accept claims against the company.
The FSCS said it was trying to “establish what levels of due diligence were carried out by the firm” before it allowed customers to transfer their life savings into high-risk deals.
In many cases, customers were recommended to Berkeley Burke by a financial adviser. The FSCS said it had already paid out a number of claims made against advice firms, which had since ceased trading, relating to the Berkeley Burke case.
Customers are able to lodge a complaint about Berkeley Burke itself, even if they have already made a claim against an advice firm.
Telegraph Money has called on policymakers to ban the sale of unregulated investments by regulated firms, as this can give customers the wrong impression that risky schemes have been approved by the watchdog.
Pension savers have been caught out on several occasions as firms have collapsed. Other Sipp providers to close recently include Brooklands Trustees, Stadia Trustees and Montpelier Pension Administration Services. The FSCS has been forced to pay out compensation in each of these cases.
Glyn Taylor of APJ Solicitors said that Berkeley Burke had opted to enter administration rather than face an appeal hearing in the High Court which was scheduled for October 15.
“It was extremely likely that Berkeley Burke would have lost the appeal,” he said.
“We believe the appeal won’t go ahead on October 15. If you have invested with Berkeley Burke, your money should not be impacted, as your money is not invested in the Sipp provider, but held separately in the specific investments you have chosen and won’t be taken by creditors.”
The wider Berkeley Burke Group stated that it "continues to trade profitably and as normal" and is managing its day-to-day business in full compliance with its regulatory duties.
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