I have just been reading the appeal of an unauthorised payment charge on a Sipp member where an investment was made into a company and from this investment a loan was made to the member.

The judge, quite rightly in my opinion, upheld the charge on the scheme member.

The appeal concerned the application of the pension scheme provisions contained in Part 4 of the Finance Act 2004 to a loan of £75,000 entered into in October 2010.

The issue was whether or not, when viewed in conjunction with certain other transactions, the loan was an “unauthorised payment” to the Appellant, giving rise to an income tax charge on him of £30,000.

To you and me, this would clearly be wrong.

To the Sipp provider involved it was wrong and they were aware that it could happen and so made the member sign a declaration to say that no loans would be made to them.

The full judgement can be seen here...

This declaration was carefully and tightly worded but the end result was that Mr White could possibly get around the rules. But nonetheless, the provider was doing the right thing by trying to protect the member, but also giving them the investment freedom that is expected with a Sipp.

Looking at this case, the Sipp provider could have refused the investment but if it stacked up on all other due diligence why would they?

Many providers ask for members to confirm they won’t do things and have to rely on their honesty. My point here is that scams are often blamed on administrators and providers letting them happen, but there are still plenty of cases where there is financial pressure on the member or such a blatant disregard for the rules that people will just do as they want and then try and wriggle out of the consequences.

I am pleased to say that in this case I can’t see that the provider is being blamed, but having seen other cases over the years, I suspect they are waiting for that complaint to come with the “you shouldn’t have let me do this” excuse we so often see.

Providers always start on the back foot in these cases, which is clearly wrong when they are most likely unaware of what is or was going on within a company they have no control over.

Providers often get a bad reputation and get the blame when it is clear to me that some, if not all, of the responsibility really should be taken by the member and often the unauthorised adviser. It is self-invested after all.

Yes providers do need to know what is going on with the funds in their care, but there is only so much they can do and the Ombudsman should remember this.