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How has the war in Ukraine and the current economic climate impacted Self-Invested Personal Pensions?
23 August 2022
Vanessa Bowern, Head of Financial Mis-selling at TRUE, considers how the war in Ukraine could affect the performance of SIPPs and the asset pension funds they are invested into.
Russian’s invasion of the Ukraine sent shockwaves around the globe, and with that came a great deal of market volatility. There have been many ups and downs in the global markets as investors try to respond to the crisis which unfolded.
What sort of SIPP investments are there?
Self-Invested Personal Pensions (SIPP’s) allow more flexibility to invest pension funds and they are intended for people who are experienced investors, seasoned in managing their own fund and switching their investments regularly.
It has been found that many people placed their hard-earned cash into high-risk investment SIPPs and were often not properly advised of the risks involved. Some of which have sadly been left with significant financial losses.
SIPPs largely involve investing a pension pot into the following range of assets:
- Overseas land and property
- Green Oil
- Store Pods
- Resort developments
- Carbon credits
- Commercial property (shops, offices, factory premises)
- Unit trusts
- Investment trusts
- Insurance company funds
- Government securities
- Traded endowment policies
- Quoted UK and overseas stocks and shares
- Unlisted shares
The funds can be split over multiple investments so it’s important to know and understand where the pension funds will be invested once they are transferred into the SIPP.
How might these assets be affected by the war in Ukraine?
The type of investment pension funds that is invested into, will determine to what extent the investment is affected by an event such as the war in Ukraine.
If the investments are diversified, spanning global stock markets, and there is exposure to the Russian economy within those investments, there could be an adverse effect on the value of an investment, as Russian stocks and shares plummeted following the invasion.
Even if there is no direct exposure to the Russian economy, investments can still be affected by the global reaction to the war in Ukraine, for example, many companies who previously had contracts in Russia (for the sales of goods and services for example) have now withdrawn.
Could your SIPP be affected?
Knowing and understanding where pension funds have been invested is key, and usually people are reliant on financial advisors to ensure that funds are invested carefully, diligently and in their best interests.
Whilst it is possible the investments will recover in the future, for those who are close to retirement and are considering taking an income from their pension, it may be the case that the value of the pension has decreased, which will be disappointing when they have worked hard to build up a pension pot to help them enjoy their retirement.
According to Interactive Investor data “the average value of a self-invested personal pension has fallen by 12% from £221,713 at the end of December 2021 to £202,134 at the end of February and the start of the Russian invasion of Ukraine, to £196,109 now.” (1).
It may therefore be the case that there has been a decrease in the pension funds people have worked hard to save, especially where their funds have been invested into high-risk schemes which were not properly vetted by their financial advisor or SIPP provider ahead of the transfer.
How do I know if I have been mis-sold my SIPP pension?
If you have invested your pension in a SIPP scheme, have suffered financial losses as a direct consequence and at least one of the following criteria apply, you may have grounds for a mis-sold pension claim:
- Investment failed– You were guaranteed a financial return which didn’t materialise.
- Unexplained Fees– You were faced with additional costs, which weren’t explained to you from the start.
- Unexplained Risks– You were not informed of the financial risk associated with your investment.
- Unsuitable Scheme– You received advice to move your pension into a higher risk SIPP, when this was not suitable for your needs.
- Pressure Selling– Your financial advisor used aggressive sales techniques to pressure you into investing in a scheme that you did not want.
What can we do to help you?
If you think you may have suffered a financial loss on your pension or investment, speak to TRUE today. We have a team of highly experienced, and diligent specialists who can investigate a claim on your behalf. For more information, visit our Mis-sold Pensions and Self Invested Personal Pensions (SIPP) information page. If you would like to speak to one of our specialists directly, please call us on 0344 854 7000 or email email@example.com.
Source (1): www.ii.co.uk/what-does-war-ukraine-mean-pensions [14th March 2022].