Advisers have hit out at the Financial Services Compensation Scheme for landing life and pensions intermediaries with aninterim £20m levy after a wave of Sipp misselling claims.
Firms began receiving invoices on 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 move comes after the FSCS announced plans to increase 2015/16 levies for advisers earlier this year, with life and pensions advisers’ levy rising from £33m in 2014/15 to £57m.
Page Russell director Tim Page says: “This is nearly two thirds of last year’s levy for life and pensions intermediaries. Once again advisers are having to clear up other people’s mess, despite being told by the FSCS we were paying higher annual levies to prevent these kind of volatilities.
“Interim levies are hugely irksome because they are so difficult to budget for. It feels very unfair that – like the vast majority of firms – despite not touching this type of business with a barge pole, we are having to pay for the few which did.”
Almary Green managing director Carl Lamb says: “This announcement makes your heart sink. It is very frustrating that prudent advisers are made to pay for those who have done wrong.”
The FSCS says the primary driver for the interim levy is its decision to start paying compensation for losses in the value of investments held in Sipps, as part of advice claims over Sipp transfers.
The lifeboat scheme announced the change in policy last month. Previously, it would only compensate consumers making claims about advice to switch to a Sipp for lost pension growth and charges.
It will pay out a maximum of £50,000 per investment claim, the costs of which will fall on the life and pensions intermediation class.
FSCS chief executive Mark Neale says: “I fully recognise that demands for money outside the annual levy cycle are never easy for firms.
“We do not have 20/20 vision. We do not always have sight of firm failures in the year ahead when we set the levy.
“We cannot always predict the volume and size of claims arising from failures we do know about.
“And there can always be new legal or regulatory developments with implications for FSCS’ judgement about the eligibility of claims and the quantification of losses. This supplementary levy illustrates exactly these uncertainties.”
Neale says the volume of Sipp claims carries “cautionary lessons” for the Government’s pension reforms being introduced in April.
He says: “The people we are compensating now were not reckless or happy-go-lucky. They simply wanted to make modest retirement savings go further and got very bad advice about how to achieve that.
“There will be many more people from April who also want to maximise the income generated by their retirement savings. It is critically important that these people receive guidance not only about the options open to them, but also about FSCS protection of the different products they might choose.
“That is why FSCS is working closely with the providers of the Pension Wise service to ensure people understand FSCS protection.”
The FSCS’s plan and budget for 2015/16, published in January, revealed the overall levy will rise from £276m in 2014/15 to £287m in 2015/16. Investment intermediaries will contribute £125m next year, up from £112m in 2014/15.