Clients who lost pension savings held in high-risk investments face losing more than 30% of their possible compensation, even if they are successful in a legal battle with their Sipp provider, due to the charging model of their solicitor firm.
Anthony Philip James & Co (APJ) recently launched 30 legal cases against Sipp provider Liberty Sipp regarding its use to invest in a number of schemes including Ethical Forestry and Global Plantations. It has also lodged 500 complaints with the Financial Ombudsman Service on behalf of clients who lost pension savings with Liberty Sipp.
The case alleges Liberty Sipp accepted high-risk investments from unregulated introducers, contrary to regulations. If successful, it could set a legal precedent for future claims against Sipp providers, and win back money for those who have lost their pension savings in such investments.
However documents seen by New Model Adviser® show that if the Liberty Sipp clients win their claim they will have to pay significant sums of any compensation they receive in the form of a 'contingent fee agreement' with the law firm.
'If you win the case (which means that an agreement is reached that money is paid to you by anyone) you pay us a fee of 30% plus VAT at the standard rate, currently 20% of money we recover. You also pay us disbursements,' the agreement states.
'If you lose you do not pay us anything, except disbursements.' Disbursements are payments made on the client's behalf to other parties involved in the case.
If the client ends the agreement before the case is won or lost, however, they are liable to pay APJ's costs, at the rate of £354 (including VAT) per hour for liaison with a partner, with letters and telephone calls charged at £35.40 each, unless they last for 10 minutes or longer, in which case 'they will be charged at the appropriate proportion of the hourly rate'.
Clients would also pay £260.40 per hour (including VAT) for a solicitor and £216 per hour for a trainee or equivalent.
APJ managing director Anthony Wilson said the firm's fees were 'in line with legal industry averages' for complex financial mis-selling cases.
He added: 'In many cases relating to the mis-selling of Sipps, a range of parties were involved in the mis-selling from unregulated introducers to IFAs and Sipp providers. Clients' pensions have often been invested through these parties into a number of different funds, largely based overseas.
'We are committed to ensuring that our clients get the maximum possible compensation to put them back in the position they would have been in had they not moved their pensions into a Sipp, something that is often only possible through litigation against the Sipp providers.
'This is not a process clients could manage themselves, as it requires a qualified financial mis-selling solicitor to prepare the legal arguments needed to ensure that the courts hold the Sipp providers liable for the losses our clients have suffered.'
Wilson said the firm was setting legal precedents in order to get clients redress, and that without this 'there remains a real risk the clients may receive nothing or only a fraction of the total they invested'.
He added: 'We incur a number of costs in bringing these complex legal cases against Sipp providers, therefore our fees reflect the significant expertise, time and resource that we dedicate to cases to secure appropriate redress for our clients.'
APJ recently issued communications suggesting the Financial Conduct Authority (FCA) was 'working with' the firm on the case. But New Model Adviser® understands that while the regulator has shared information with APJ, it is not part of the Liberty Sipp case.
Liberty Sipp managing director John Fox accused AJP of charging 'eye-watering fees' and spreading 'fake news' during its claims against the Sipp provider.