FSCS hit with more than 300 claims over collapsed Sipp provider

The Financial Services Compensation Scheme has received more than 300 claims against the collapsed Lifetime Sipp Company in the last six months.

Data provided to Money Marketing by the FSCS shows the number of claims being considered by the lifeboat fund has ballooned from 220 in July to 310 at the current time.

Most of the claims are pensions related with 213 claims under consideration. The majority of the rest are at an earlier stage of application, so the product or advice type they are related too has not been determined yet.

None have been upheld or rejected for compensation yet as its approach to claims against the likes of Lifetime is a relatively new one.

The FSCS says the claims now have to be seen in the context of the FCA’s tougher stance regarding the due diligence responsibilities Sipp providers have to clients.

The FSCS adds it has sought the advice of an external legal counsel about these claims and is currently awaiting that advice.

Once it has received and considered the advice, it hopes to be in a position to decide whether or not to formally declare Lifetime in default so it can start paying out compensation.

Administrators Kingston Smith & Partners previously estimated compensation claims against the Sipp provider would be valued around £56m.

Around £22m of claims were from clients who have no insurance, while £34.5m may have insurance.

The nearly £56m claims are spread across more than 2,000 Sipp clients and account for the most of the claims logged against Lifetime.

Lifetime operated 4,746 Sipps in total across three tranches with two tranches of “untainted” Sipps and one tranche of “tainted” Sipps.

There are 1,892 Sipps in the first tranche, 836 in the second tranche and 2,018 in the third “tainted tranche”.

In May Money Marketing reported Hartley Pensions had bought the “untainted” assets of Lifetime and agreed to administer the “tainted” Sipps as well.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Shouldn’t that be Most OF the claims are pensions related?

    That aside, this appears to be yet another example of the FSA/FCA having failed to check compliance (or not) with its own guidelines/rules. Surely, the amount of resources required (just a small dedicated team) simply to get all SIPP providers to declare periodically how many potentially dangerous non-standard investments (and of what type) they’d been facilitating (and then, needless to say, to follow up on any such admissions) would have been relatively modest?

    What IS the use of the regulator issuing endless new rules and guidance statements and then just forgetting about them until another motorway pile-up happens? It beggars belief.

    On a similar theme, it’s been established beyond doubt that the FCA knew but DID NOTHING about the disastrous problems looming with Connaught years before they crystallised.

    Again, I refer readers to the FCA’s utterly specious claims at https://www.fca.org.uk/about:-

    Protecting consumers

    We secure an appropriate degree of protection for consumers.

    Enhancing market integrity

    We protect and enhance the integrity of the UK financial system.

    No they don’t. It’s all just aspirational hogwash.

    • Nicholas Pleasure 24th October 2018 at 10:51 am

      Yes, but to be fair they are busy implementing MIFID II which is going to make financial advice far more pointlessly expensive than it needs to be and almost certainly put many honest small firms out of business, that will never be able to meet the stupid regulations and charge clients for bundles of paper they don’t want.

      They have priorities, Julian.

    • PS07/11 (July 2007) the foundation of RPPD and the new PROD sourcebook was published about the same time as SIPP providers became regulated in 2007.

      SIPP firm’s inaction in letting unregulated introducers provide them with business and their allowance of unregulated schemes that had all the hallmarks of scams should have been picked up earlier but was highlighted in both thematic reviews of the SIPP market from 2009 onwards.

      You can understand why SIPPs want to obviate responsibility and claim this is some kind of new requirement but despite all the warnings it has gone on for far too long.

  2. How long before unregulated investments are removed from UK Pension Schemes?

    The list of failures continues to grow and to my mind does not warrant the risk of allowing these investments.

    UK commercial property purchases, yes, but unregulated collective offshore investments or even on shore funds have proven to be unreliable at best and only exist to avoid regulation. The vast majority of regulated advisers would not recommend these funds anyway.

    How many more consumers have to suffer and the industry have to pay for, before the regulator requests a change in the law and stops this unethical practice?

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