The Financial Services Compensation Scheme saw an £11m increase in Sipp related claims in the 2018/19 financial year, the lifeboat fund has revealed today.
The FSCS paid out £123m in Sipp-related compensation, out of a total of £157m in claims against life and pensions intermediaries.
The jump in Sipp claims was large enough to offset the £5m fall in payment protection insurance payouts, the FSCS says. Overall, PPI claims contributed £11m towards the compensation pot.
The Sipp claim increase meant an additional £78m supplementary levy was needed, which was paid for by funding classes across retail financial services.
In financial statements released today, the FSCS says most claims around life and pensions advice involved Sipps, and that most of those complaints surrounded advice given by financial advisers to move pension savings out of existing occupational pension arrangements and invest in other investments within Sipp wrappers.
The lifeboat fund notes: “These investments are often high risk and unsuitable for most investors, so some inevitably fail and become illiquid. This trend began four years ago, and costs are still rising.”
It adds that it will keep trying to make recoveries from firms themselves, “continuing to focus across UK and international jurisdictions, where the underlying investment has failed (in Sipp mis-selling and other similar cases).”
FSCS chief executive Caroline Rainbird says: “As we continue to see a rise in Sipp related claims we are working with our partners in industry to gain valuable insight into the causes of firm failures and about the directors and advisers involved in mis-selling.”