The Financial Services Compensation Scheme has handed investment advisers a refund of £50m while warning an additional £36m will be levied on advisers and the wider industry to pay for poor Sipp advice.
In a statement published today, the FSCS says the £36m supplementary levy on life and pensions advisers is due to ongoing high numbers of Sipp related claims.
The annual levy on life and pensions advisers for 2016/17 has already been set at £90m. Of the additional £36m, £10m will be billed to life and pensions advisers, taking costs to the annual limit of £100m for that class.
This will trigger a cross-subsidy, with the remaining £26m shared across the industry.
Separately, the FSCS has set its total industry levies for 2017/18 at £378m, compared with £401m in 2016/17.
FSCS chief executive Mark Neale says: “We will ask life and pensions intermediaries to pay their share of an additional £36m to fund compensation for the high numbers of Sipp-related claims we are continuing to receive, but also need to trigger a cross subsidy for the first time.
“These claims relate to advice to switch pension funds into high-risk investments. We previously flagged the potential for high costs here.
“We also need to raise £63m on general insurers to compensate policyholders of the Enterprise and Gable Insurance companies. And we currently expect a deficit of £15m on our home finance intermediation account due largely to the failure of one particular firm that gave bad advice to engage in risky property investments alongside mortgage advice.”
How the levy breaks down for 2016/17: