Berkeley Burke Enters Administration
On September 18th, 2019, Berkeley Burke, a pension provider, entered into administration. This event signalled the start of a complex sequence of acquisitions and legal challenges that continue to affect pension holders and financial advisers alike.
Acquisition by STM Group
In a strategic move, STM Group, a big player in the financial services sector, acquired 2 businesses that are independent of Berkely Burke SIPP; Berkeley Burke (Financial Services) Ltd and Berkeley Burke Employee Benefit Consultants Ltd in August 2020. These acquisitions, which encompassed 100% of the share capital, brought into STM Group's fold a wealth of expertise in administering and consulting for small, self-administered pension schemes and international businesses.
Involvement in Investments and Financial Advisors
Berkeley Burke managed a range of investments, some of which were high-risk ventures. These included:
These investments have been central to the challenges and controversies surrounding Berkeley Burke's operations.
Douglas Baillie, an IFA, was notably involved in the Berkeley Burke case. Financial advisors like Baillie played a critical role in advising clients on pension investments, including those managed by Berkeley Burke.
The SIPP Arm Sale to Hartley Pensions
In a significant development, RSM Restructuring Advisory LLP, appointed as administrators immediately after Berkeley Burke's fall into administration, announced a pre-pack deal to sell the SIPP arm to Hartley Pensions. This transaction was pivotal in the unfolding events in the pension industry.
The Expansion of Hartley Pensions
Hartley Pensions, following the acquisition of Berkeley Burke's SIPP business, further expanded by acquiring the client books of various failing pension providers, including:
- Guardian (GPC)
- Berkeley Burke, Greyfriars SIPP
- Lifetime SIPP
- Guinness Mahon
However, in a turn of events, Hartley Pensions went into administration on July 29, 2022, upon the request of the Financial Conduct Authority (FCA).
The Plight of Pension Holders
In the wake of these developments, pension holders faced significant challenges. Industry press highlighted the struggles of pensioners, particularly those who transitioned from Berkeley Burke's SIPP to Hartley Pensions. One such client, ‘Mr. S’, who had invested in a storage unit that failed, expressed his frustration, stating: "I have been constantly calling and speaking with them and raising complaints to try to get my money back". He also mentioned the slow pace of legal cases, underscoring the urgency for many investors and that he felt he was “fighting alone” so had started contacting other Berkely Burke and Hartley Pensions clients, and advisors.
Formation of an Action Group by Pension Holders
Mr. S's efforts extended to organising an action group, inviting other Berkeley Burke and Hartley Pensions clients, as well as advisers, to join forces. This initiative reflects the collective struggle faced by over 12,000 SIPP clients, each bound by varying fee arrangements due to Hartley Pensions' acquisition of multiple businesses.
FOS Ruling and Financial Implications
The Financial Ombudsman Service (FOS) found against Hartley Pensions in a complaint regarding excessive SIPP administration fees. This ruling is significant, as it involved a SIPP initially managed by Greyfriars Asset Management, another entity taken over by Hartley Pensions in 2018.
Compensation Payouts by FSCS
As of February 2023, the Financial Services Compensation Scheme (FSCS) has compensated £58.8 million to claimants against the failed Berkeley Burke SIPP Administration. This substantial payout, covering 1,795 upheld claims out of a total of 2,155, highlights the scale of the financial fallout.
The Core of the Claims
The majority of the claims are centered around the inclusion of high-risk, unconventional investments (known as non-standard investments or NSIs) into SIPPs that were not advised upon, particularly during the years 2010 to 2012. This timeframe proved to be pivotal in the escalation of the issues associated with Berkeley Burke.
It has been observed that IFAs played a notable role in recommending many customers to transfer their existing pensions into a Berkeley Burke Sipp, highlighting the influence of financial advisers in these transactions.
Transfer of Assets to Hartley SIPP
Post-acquisition, the assets held within each Berkeley Burke SIPP are set to transfer to a Hartley SIPP, barring any objections or alternative instructions from customers. This transfer is a crucial step in the resolution process for the affected clients.
The Issue with Unregulated Third-Party Introducers
Berkeley Burke, among a few other SIPP providers, has been scrutinised for accepting clients who were influenced by unregulated third-party introducers. These introducers often used tactics like cold calls offering free pension reviews, and luring investors with promises of higher returns compared to their original pension providers.
Legal Scrutiny and Compensation Requirements
Berkeley Burke, together with other firms like Carey Pensions and Liberty SIPP, is under legal examination for not adequately safeguarding client interests. The company has been mandated to compensate almost £1 million following its non-compliance with a judicial directive and its decision to cease participating in ongoing legal proceedings.
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