The Financial Services Compensation Scheme has seen claims involving bad advice to move retirement savings into risky assets in Sipps increase by more than a third.
The lifeboat fund’s annual report and accounts released today show Sipp compensation has increased from £78m in 2015/16 to £105m in 2016/17.
This figure was £10m higher than predicted.
The FSCS said that the trend towards Sipp claims began around two years ago, but claims were now being levied against an increasing number of failed firms who had advised on life and pensions products.
The report explains: “Sipp-related claims typically involve advice given by financial advisers to move pension savings out of existing occupational pension arrangements and invest in other investments within Sipp wrappers. These investments are often high risk and unsuitable for most investors. Their riskiness means some investments inevitably fail and become illiquid.”
Levies on life and pensions advisers totalled £126m in 2016/17, including a £36m supplementary levy to handle Sipp volumes, breaking the £100m annual limit on the class so partly funded across the rest of the industry.
However, investment advisers received a £50m refund on their bills.
Chief executive Mark Neale was paid a total of £292,315, the accounts also show, including a bonus of £32,429.
This was a slight increase on his pay in 2016, where he received a total of £289,227 including a £32,108 bonus.
Bonuses are capped at 20 per cent of basic salary at the FSCS, and chairman Lawrence Churchill’s pay was held at £75,000.