Midlands-based Active Wealth is one of nine firms that has stopped giving pension transfer advice in light of the British Steel pension saga.
The FSCS says it will declare Active Wealth in default and start to pay claims for compensation once it is satisfied the firm cannot pay claims itself.
The lifeboat fund is working with the FCA to understand Active Wealth’s position.
FSCS chief executive Mark Neale says: “We are working as quickly as possible to provide some certainty for customers, and will provide further updates on our website as more information becomes available.”
In a letter to MPs on the work and pensions select committee published last week, Active Wealth director Darren Reynolds explained how the firm calculates ongoing charges.
Reynolds said in the letter: “In most cases ongoing advisory service would amount to five to six hours of work, based on hourly rate of £100. This would result in annual charge of £500 to £600 per annum.”
“While the fees would not have been calculated as a percentage of the pension fund, if we assume an average pension pot of £300,000, then a £600 ongoing adviser charge would equate to 0.2 per cent of the initial pension pot, prior to the addition of any investment growth.”
In a report released this week the committee called for a ban on contingent charging.
The Pensions Regulator and the FCA were also blasted for their handling of the “major misselling scandal” relating to the British Steel Pensions Scheme.
The other eight firms that have been asked to stop advising on pension transfers are: Vintage Investment Services, Retirement & Pension Planning Services, West Wales Financial Services, Pembrokeshire Mortgage Centre, Mansion Park, Bartholomew Hawkins, Inspirational Financial Management and County Capital Wealth Management.