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Pension advisers’ FSCS levy triples to £119m following Sipp claims

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The Financial Services Compensation Scheme levy for life and pensions advisers increased by £85m in the year ending 31 March 2016.

According to its annual report, the FSCS received a £119.4m levy from life and pensions advisers for the year ended 31 March 2016 ( 2015: £34.5m) and a £115.7m levy from investment advisers (2015: £112.2m).

The organisation says the increase in the life and pensions levy was due to an increase in Sipp claims. Over the course of the year, the FSCS paid out nearly £77m in compensation related to Sipp claims.

The FSCS paid out £77m to consumers with claims against investment financial advisers that stopped trading in 2015/16.

Claims against the life and pensions advice sector totalled £84m, which was an increase from £35m the previous year.

The increase was due to the average pay-out against advisers that recommended Sipp investments rising year-on-year from £29,500 to £38,600.

Advisers in the life and pensions funding class had 3,948 new claims made against them, which was down from 4,442 the previous year. The average pay-out in this class was £34,254.16 – more than double the average payout in 2014/15 of £16,375.22.

Those in the investment advice funding class received 16,256 new claims, which was an increase from 9,049 the prior year. The average pay-out in this class decreased from £19,450.20 in 2014/15 to £6,832.58 last year.

The FSCS recovered £130m last year in relation to the collapse of Keydata.

FSCS chief executive Mark Neale says: “The cost of running FSCS is down by almost eight per cent, which is good news for the financial services industry that funds it. Management expenses were £66m in 2015/16, compared with £71.5m in the previous year.”

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. I’m a Protection Broker, how I love picking up the tab, for Pension & Sipp miss selling, in any other industry this sort of charge would never happen, surely this must be illegal, to be Fined for someone else’s miss-deeds!

  2. Madness. The current FSCS and FOS system needs to be overhauled. I don’t know what the exact % split is for upheld complaints for regulated investments vs unregulated ones, but it seems like nearly all FOS/FSCS upheld complaints are for unregulated investments via SIPPs. Strong calls for a product levy and to remove unregulated investments from being covered for compensation.

  3. A lot of these claims are due to a number of unsafe FOS adjudications where the IFA has no rights of appeal.

  4. I think that it is time to de-categorise unregulated SIPP investments from the mainstream FSCS adviser funding.

    Clearly the issue of holding unregulated investments within these plans is at the root of the problem (whether advised/facilitated or otherwise) and it is happening on a grand scale.

    We have applied specific permissions/qualifications to areas such as Mortgage Advice, Equity Release and the like, so why not SIPP investment?

    If I am unable to assist someone with such a need, I will happily take it on the chin if it means avoiding having to play in the fast lane with the ‘high flyers’ of this industry (yes, we all know who you are, you set the benchmark for regulation let’s face it!).

    Cautious clients should not have to fund the adventurous/stupid, that is not what they have signed up for and it is certainly not what I have signed up for!

  5. You have to love the remark (probably tongue in cheek) from Neale ” the cost of running the FSCS is down”

    I am reminded of a client who, when asked or questioned why his then PEP funds had lost a significant amount of money, his previous adviser replied ” well look on the positive side at least its a tax free loss”

    Well that,s all OK then Mr Neale, I shall sleep soundly tonight then

  6. We hear about the so called ‘advice gap’ and the fact clients need ‘wealth’ to be able to receive advice.

    As an advice firm we would love to be able to reduce the cost of our advice so that it is more viable for more people but the fixed and variable costs of running a business continue to rise and despite the FCA seeking a more ‘simple and clear’ advice path, we look at the number of unsubstantiated complaints and also issues such as this and you simply wonder about the direction in which we are all heading.

    The fact regulated advisers pick up the tab for miss sold unregulated products (at time by unregulated individuals) and/or ‘the tab’ from companies which fail (only for the directors to resurface) are the massive elephants in the room.

  7. Julian Stevens 13th July 2016 at 1:07 pm

    Why didn’t the FSA/FCA take steps to identify these patently bad advice activities and put a stop to them before they ballooned into a full blown crisis? That’s supposed to be its job isn’t it?

    With a shrug of its shoulders, it’ll say: Oh well, shit happens, we were busy with other stuff and anyway, the adviser community will (be forced to) pick up the tab, so why should we care?

    • They could do worse than one or two of the commentators on here to provide them with some insight/oversight into unregulated practices and products (although proper feedback and action would be a must!).

      None so blind as they say, or is it something to do with not wanting to swim in the shallows, I guess a bit of both maybe!

  8. Sadly I watched Panorama on Monday night and for those who didnt without wanting to spoil the ‘surprise’ I can see another compensation claim looming.
    Unregulated individuals targeting transfers from Final Salary schemes into ‘secure 10% returns’ Sipps building hotels in Cape Verdi.
    oh yes and the FCA, Pension regulator etc refused to appear on the program!!!!
    surely its not beyond the realms of man for the FCA to produce a list of allowable investments (the ‘standard issue’ funds)that unless it is on the approved list scheme administrators arent allowed to transfer, Sipps cant invest in.
    So rather than keep sending out the ambulances prevent the accident in the first place!!!

    And why should people who wouldnt advise this investment at all have to compensate those that make a fortune off other peoples misery and disappear into the Ether?

  9. Less and less advisers and firms and more and more complaints. Work it out?

  10. Dennis Burling 13th July 2016 at 3:40 pm

    Quite agree with Julian, why should the regulated community have to pick up the tab for the con men in the business who avoid regulation, do what they like, rip off the clients and then disappear with the money with no comeback – why doesn’t the ombudsman say, not a regulated adviser, losses not covered – simples !!!

  11. “why should the regulated community have to pick up the tab for the con men in the business who avoid regulation, do what they like, rip off the clients and then disappear with the money with no comeback”?

    Because numpty REGULATED advisers blindly sign off on this rubbish. Reports in other places quote the FSCS as saying they see a lot of the behaviour described by the FSA back in early 2013 (that is, advising on the SIPP and not the underlying investment) which has also had a lot of airtime in MM and elsewhere recently due to similar FOS decisions. Julian’s network, take a bow!

  12. The issue and demand re these unregulated investments claims should be for additional regulatory permissions. Regulated advisers to be able to recommend and arrange unregulated investments should have to apply for additional permissions and pay an additional levy. We all know for the majority of UK consumers there are more than enough regulated products and investments to meet their needs. Some changes by the providers offering Regulated SIPP investments only would not be that hard or costly to produce and regulating some other investment vehicles would not be that hard to do. .

    The reason this does not happen is that they know that the majority of regulated advisers would not apply, leaving the unregulated investment area unable to be supported by the FSCS claims. In other words they know that consumers taking these high risk investments would not be covered and would see their monies stolen with no compensation being able to be offered.

    This permission would effectively close the current loop whole that is being used, even if this is in my opinion correct for them to do so at this time. Why do regulated adviser recommend these highly dangerous offshore investments? We all know why, which is why the honest and ethical advisers do not consider them a viable investment class for the main stream consumer. More frustrating is we are unable to stop them, have no choice then to keep paying out for their greed.

    So. we the honest regulated adviser will continue to HAVE to pay for these unethical, fraudsters, knowing they will walk away with their ill-gotten gains. They leave the consumers crushed, the claims companies and lawyer’s salivating, the FCA unwilling to act, the FSCS funded to pay the consumer back what the fraudster stole and all from the ethical, honest advisers and their clients.

    The media, MP’s, regulator should hang their heads in shame. They are effectively allowing this to happen as it easier then dealing with the issue.

  13. This is really depressing. I am beginning to question whether a life as an IFA is for me. At least when I was a tied agent I didn’t have to worry about this nonsense.

  14. Mark Harvey. I think we’re on the same page. This industry can be rewarding but it is greatly dispiriting when we have to pick up the bill for bad advice where the products being sold were unregulated or had never been flagged up as problematic by the regulator. I thinks its especially galling when I see I’m having to pay into a pot for complaints being upheld where I’ve never been involved in advising in a specific area and where the cowboys have upped sticks and no doubt re-appeared somewhere else. I’m reading today something like 20% of Robo Advice firms which were closely looked at in a recent investigation didn’t even have any permissions to give investment advice. How are they still getting away with this in this day and age?

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