SIPP administrators need to keep an eye on their communications with members and keep them informed of key financial decisions The Deputy Pensions Ombudsman gave a determination against Towry Pension Trustees Limited who were the administrator of Mr. Price's Discretionary Investment Management Agreement. The Ombudsman determined that a SIPP administrator has an ongoing responsibility to keep the policy holder informed about its proposed actions, including providing correct information about divestment procedures and timetables, even where a broad outline of such terms have previously been set out under the Investment Management Agreement.
Mr Price instructed the administrator to transfer out some of his assets which involved encashing both liquid and illiquid assets. The liquid assets were promptly turned into cash and placed in a bank account providing a low rate of interest, and the illiquid assets, in a hedge fund, took a reasonable period of time before they could be turned into cash. Mr Price was not aware that encashing the liquid assets quickly would result in them being placed in a low interest bank account.
The Ombudsman found that if Mr Price had been aware of the low interest rate he may have given different instructions. The Ombudsman determined that a failure to inform Mr Price of the consequences of his request prevented him from being able to give different disinvestment instructions. The administrator was required to compensate Mr Price the difference between the notional transfer value of the liquid assets when they were actually sold and their value if they had been sold on the same day as the illiquid assets, plus interest and base rate.
This article was originally published in the May 2011 Pensions Update. To read the other articles in this update please click here.
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