Background
The claimants alleged that unauthorised financial adviser Avacade Ltd gave poor advice that led them to transfer pension funds into self-invested personal pensions administered by Liberty SIPP. They subsequently invested substantial amounts in high-risk forestry schemes that failed. After Liberty SIPP entered administration, the Financial Services Compensation Scheme compensated the three lead claimants for losses attributed to Liberty SIPP’s inadequate due diligence, including invested funds and SIPP fees, but not the returns their pensions would have earned had they remained in their original schemes.
Following appellate decisions establishing that arrangements of this kind could support claims under section 27 of the Financial Services and Markets Act 2000, the FSCS reconsidered the claimants’ applications. It rejected their section 27 claims on limitation grounds, reasoning that section 27(2) created a single cause of action accruing when the pension money was transferred into the SIPP. Three lead claimants brought judicial-review proceedings, while 48 related claims were stayed.
The Court’s Holding
Mrs Justice Hill dismissed the claim. She held that section 27(2) creates one cause of action, with different forms of recovery under paragraphs (a) and (b), rather than separate causes of action for return of transferred money or property and compensation for resulting loss. That single cause of action accrued on the pension-transfer date and was subject to the six-year limitation period for sums recoverable under an enactment. The FSCS therefore made no error of law in treating the claims as time-barred.
The court alternatively held that, even if section 27(2)(b) created a distinct compensation claim, each lead claimant suffered loss upon transfer because the claimant exchanged the rights and benefits of the original pension for a less advantageous and riskier arrangement and incurred associated liabilities. The outcome would therefore have been the same, and relief would in any event have been refused under section 31(2A)(a) of the Senior Courts Act 1981. Had loss not arisen upon transfer, the court would have selected the date of investment in the high-risk scheme as the accrual date.
Key Takeaways
- Section 27(2) of FSMA creates a single cause of action encompassing recovery of transferred money or property and compensation for resulting loss.
- For these pension-transfer claims, that cause of action accrued when the pension funds were transferred into the SIPP, not when the underlying investments later failed or lost value.
- Even on a separate-cause-of-action analysis, the claimants suffered immediate loss by exchanging their original pension rights for a less advantageous, riskier arrangement.
Why It Matters
The ruling gives the FSCS, regulated firms and investors a definite starting point for limitation in section 27 pension-transfer cases: ordinarily, the date of transfer. It rejects an approach under which accrual would depend on a later and potentially complex comparison between the hypothetical value of the original pension and the fluctuating value of the SIPP.
The decision may therefore bar claims made more than six years after a transfer even where investment failure or the full financial consequences became apparent later. It also treats the recovery mechanisms in section 27(2) as remedies within one statutory cause of action rather than independently accruing claims.