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Payouts owed for carbon credits Sipp

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The Financial Ombudsman Service (Fos) recently ruled against a self-invested personal pension (Sipp) provider in a case involving an unsuitable carbon credits investment.

The investment

An “adviser”, known as Mr. K, cold-called the complainant, known as Mr R, in 2012. He claimed to act on behalf of Carbon Advice Group, who introduced him to CGFM. It was then recommended that Mr R transfer his pension into a carbon credits Sipp.

Mr R’s entire pension pot, valued at £45,000, was transferred into the scheme.

However, the volatile nature of the investment was not adequately communicated to Mr R. As a result, when the scheme went bust in 2013, his investment was valued at just £1.

Duty of care

As the investment was Mr R’s entire pension pot, CGFM had a duty of care to explain the risks carried by carbon credits schemes.

Mr R was under a lot of financial pressure as his home was in the process of being repossessed. CGFM’s ‘get rich quick’ scheme paired with a financial incentive may have seemed too good to turn down at the time.

Sipp investments

All investments carry a level of risk, which is why Mr R should not have been advised to transfer his pension pot.

Sipp transfers are normally reserved for those with a wider portfolio of options, where all would ultimately be lost if the investment ended negatively.

Carbon credits schemes

Carbon credits schemes are often unregulated and carry a high level of risk, making the investment entirely unsuitable for Mr R and many other investors. The investment also cannot be sold or traded, meaning that they cannot increase in value.

The Financial Conduct Authority (FCA) surveyed 125 people who had investments in carbon credits schemes. It found that not one investor had seen returns. However, Sipp firms continue to allow these, as IFAs promise high returns from a low investment.

If you’ve invested in a carbon credits scheme, get in touch. Our experts can advise you on the steps to take if you have been mis-sold.