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Advisers face £20m FSCS bill over Sipp misselling

The Financial Services Compensation Scheme will hit life and pensions intermediaries with a £20m interim levy following a wave of Sipp misselling claims.

Firms will begin to receive invoices from 23 March and will have 30 days to pay, or to use existing credit facilities.

The FSCS says the move was driven by the costs relating to bad advice to transfer funds from existing pension schemes into Sipps.

It says in many cases the Sipp fund was then invested in non-standard asset classes which have become illiquid, including investments in offshore property schemes.

The FSCS had initially made compensation payments to claimants where advice received led to lost pension growth and extra charges, but has now begun compensating claimants for losses in the value of the Sipp investments.

FSCS chief executive Mark Neale says: “The costs of Sipp claims are rising so we have no choice but to issue this levy to the firms that pay for FSCS protection. This interim levy will cover the costs of compensation claims until the next annual levy is available in July 2015.”

He adds: “I know this will be unwelcome news for firms facing a supplementary levy. We will continue to do all we can to provide more certainty for firms but we cannot entirely eliminate volatility in what is a pay-as-you-go funding arrangement.”

The move comes after the FSCS announced plans to increase 2015/16 levies for advisers earlier this year.

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Stabilityplease 19th March 2015 at 9:15 am

    Do I get a refund for telling clients not to do this?

    Isn’t that what the PI insurance of the advisers at fault is for?

    Would you charge BMW compensation for a bad car sold by Toyota?

    I am sick to the back teeth of working very hard to see my (modest) profits eroded to pay for the errors of
    people who made a mint and disappeared into the sunset

  2. I’m sorry but people really have to take some responsibility for investing money in this manner, whilst the advice is liable to regulation, an individuals greed or stupidity is wholly personal.
    Sick to the back teeth of this never ending scenario

  3. Words fail to express my disbelief at the stupidity of the system we have in the 21st century. Not fit for purpose is an understatement.

    As one of my clients was told when she went to the creditors meeting for a now default IFA – ‘yes sorry about that but dont worry you are all covered under the FSCS so you get you money back’. That particular ex director confirmed he was starting his new job the following week.

    Where is the incentive NOT to bend the rules, lie, cheat and con pensioners and then dump it all on the system that we pay for. Only a complete fool would design a system like that.

    Protect the consumer – more like protect the guilty.

  4. Presumably this is to cover uninsured losses because the PII of the intermediaries who recommended these unregulated investments didn’t cover them and said firms have been forced into default.

    Why aren’t ALL investments regulated? Or why aren’t all regulated advisers barred from selling unregulated investments? If something isn’t done about it, this state of affairs is going to continue ad infinitum at endless cost to the rest of us who’ve never touched these toxic products. What’s APFA trying to get done about it? (Rhetorical question).

  5. @Greg – you saved me some (much) typing. Yes I got slated for having another pop at APFA – join rather than criticise – but they have had eons to put this affront to decent IFAs right. I guess those who are members of networks are not too bothered hence the impotency of APFA can be overlooked by them. Being DA we see the true cost.

  6. This really cannot continue, where the compliant Adviser, has to keep picking up the interim levy, for rouge advisory firms, what other industry would put up with this!

  7. We get beaten up daily about “RISK” !

    You have to be honest and say to yourself, there really is no risk ! not from a bad consumers perspective, bad advisers perspective or a PI perspective !

    The FSCS levies are very real risk to us good advisers and our good clients perspective,

    My PI went up 35% 2014/15 and for what ? there is no risk for them as they don’t pay out !! are they any claims stats so we can see some form of history on this ?

  8. All the comments above are valid and when will we hear the FSCS answer these points or as it often seems for public bodies, they just impose a fine on those that are the easiest target, the good and law abiding! Mark how about you take these points back to the FSCS and push for an answer, please….

    The cases to date have arisen under the current rules so I am seriously concerned that with new pension freedom and an already expanded group of claims lawyers this is just the tip of a very very large iceberg that will continue to fall on the wrong people. Perhaps we should all refuse to pay our levy, close our firms down and reopen again …….. that way we level out the playing field with those that ruin our industry.

  9. Doesn’t SIPP stand for SELF invested. What has the failure got to do with advisory firms. The only thing we have as a firm in SIPPs for clients which could not be held in a PPP are their commercial properties, which THEY chose i.e. self investment and we simply assisted with the tax wrapper to hold them in (a SIPP)
    We have no unregulated or esoteric investments we have recommended clients hold in a pension and the nearest we have are DM AIM portfolios in ISAs! Why are we picking up the tab for something which is SELF invested.

  10. Very bad regulation policed by well meaning very ill informed regulators – send the bill to us and just carry on guys!

  11. Dear Mr Plumber you have to go and sort out a botched job done by an unqualified odd job man. Oh and by the way you will have to pay for the flood damage as well.

    Can you imagine the answer!

    Can someone please show me that the FSCS and FCA etc. have actually instilled any market confidence in the public? I bet not.

  12. I don’t like they way that the regulator is associating SIPP’s with bad advice. Reading between the lines these claims are for unregulated investment failures. SIPP’s have their place and in the age of platforms and lower costs can be used with retail clients. We do things this way but we only invest within regulated retail funds.

    I agree with the other commentators regulate all investments or stop making the regulated pay for the unregulated.

  13. Totally agree with Paul Hearnden – the new pensions freedom is just an accident waiting to happen with us picking up the inevitable huge compensation bill a few years down the line (if there are any of us left!). With all the FCA fines now going straight to the Treasury, our bills will just get bigger and bigger regardless of whether we make a sensible business decision to avoid certain types of business completely. We pay regardless. To be honest, you may as well give up being ethical and doing the best for your clients, not having any complaints, keeping up with the constant barrage of pointless rules and regulations coming out of Canary Wharf because there is no benefit in it at all!

  14. @Linden- That is exactly what I feel like. There has been NO regulator dividend for those who got there level 4 or 6 & stayed in the industry. We are being treated more and more as a cash cow, when the cash cow is actually OUR clients to fund everyone else mistakes.
    I had clients invested with Keydata and yes the FSCS met the liability because of the failure to structure correctly for ISA entitlement and then subsequently when they were deemed insolvent (but the truth still hasn’t come out as to whether the model was sound or not). None of my clients complained about the advice, it was a product failure and this government wants to launch something very similar i.e. resale of annuities which actually work in the reverse to life settlement plans where the sooner the plan holder dies the investor benefits. If either could be regulated properly, perhaps they would work, it is regulation that keeps failing which is not helped by continual goalpost changing.
    AS to SIPPs, most of the WRAPs we use offer a PPP and a SIPP option so we always recommend the PPP. If the consumer wants a SIPP, then they can sort that out themselves just as they can what assets are held in it, that is why it is called SELF investment. We have some PPPs where the client self selects some of his ISA;s share holdings, but we manage the overall risk for the portfolio and reduce equity exposure elsewhere to keep him in line overall.

  15. @ Linden

    Your last paragraph is spot on : – “To be honest, you may as well give up being ethical and doing the best for your clients, not having any complaints, keeping up with the constant barrage of pointless rules and regulations coming out of Canary Wharf because there is no benefit in it at all!”

    I thought after RDR (wrongly), things would settle and I would be able to return to some kind of normal working routine, not so ! the pressure, cost and constant regulatory demand just keeps being piled on.

    We have now got to saturation point (if you will) most, if not all we do is self defeating and there is no opportunity to plan or budget, so you may as well stick two fingers up to the man !!

    As you say there really is no benefit in being good, honest and ethical,

    I know my RMAR is due soon and I am seriously considering just telling the FCA to stuff it and refuse to complete it (I really have had enough) like wise with the fees and levies, !

  16. Oh you ain’t seen nothing yet. Just wait for all the pensions and annuities for cash claims in the next few years. It will make this look like a mere bagatelle.

  17. Oh thanks Harry 🙁 I had a post budget Migraine this morning so didn’t come in to the office until later. Like DH – I really have had enough of the continual goalpost swapping for water polo nets.
    How on earth are we supposed to plan ANYTHING? This is rearranging the deckchairs on the titanic, it is adding NO value to UK PLC. We try not to let successive govts take a shovel to our clients monies, but middle England is being bled dry while the ultra rich get richer and the ultra poor give up…..

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