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FSCS tallies up £11m increase in Sipp claims

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.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Seems quite ironic that the SIPP providers pay a smaller share of the FSCS levy?

    Time to rethink the FSCS levy before the big storm comes around. The FSCS levy is now a larger percentage cost than Professional indemnity insurance.

  2. Alasdair Sampson 27th June 2019 at 4:54 pm

    SIPP providers have at long last been stripped of their Teflon coat. And not before time.

    If you have clients with potential complaints against live SIPPs do be prepared for ducking and diving.

    SIPPs will always try to get complaints shifted to the Pension Ombudsman because he is more likely to find in their favour.

    They will argue bogus jurisdictional issues and contractual exculpatory clauses.

    I have all the material handy for any one thinking of a complaint against a SIPP to resist their skulduggery. Happy to share on no cost basis. Email me at alasdair@fsalawyer.co.uk.

  3. Julian Stevens 27th June 2019 at 5:07 pm

    So these complaints aren’t really about SIPPs per se. Rather, they’re about failed, high risk and unsuitable off-piste investments which happen to have been recommended via SIPPs.

    And, of course, the reason why all the liabilities for these mis-sales are being foisted on the rest of us by way of the FSCS is because the FCA didn’t do its job properly by ensuring that the firms in question held relevant PII cover. Hence their swift descent into default.

    The regulator fails but the good guys pick up the tab. No one is ever held to account, though now Nicky Morgan is on the case, that may, we hope, finally be about to change.

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