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Pension review puts 5% of IFAs out of business

More than 5 per cent of IFA firms went bust last year because of phase one of the pension review.

The startling figures from the Investors&#39 Compensation Scheme also reveal that half the IFAs who have gone bust since the scheme&#39s launch in 1988 did so in the last year.

Of the 1,321 firms declared in default since the scheme&#39s inception 12 years ago, 595 or 45 per cent were declared in the year to March 31, 2000.

The ICS says over 90 per cent of these firms – 1,210 – are IFAs. It leaves around 9,500 IFA firms in operation, according to Aifa.

The ICS attributes the increase in firms going to the wall to the effects of phase one of the review. It cannot say whether the numbers will stay so high during the coming year until the new year&#39s caseload is dealt with. But early indications are that they will. There have been 123 default declarations since March.

The findings are set out in the ICS annual report released last week. The report shows the number of claims completed to the end of March 2000 shot up by 130 per cent on the previous year to 7,966 from 3,480.

The ICS says it was the “busiest year ever” resulting in compensation payouts of £51.6m, as predicted in Money Marketing in March.

Some 80 per cent of the 7,966 cases resulted from phase one of the review. The ICS expects phase one cases to tail off in the autumn to be replaced by an equal number of phase two cases for the next two years.

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