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Sipp claims pose FSCS interim levy risk for advisers

The Financial Services Compensation Scheme is warning advisers could be hit with an interim levy for 2014/15 due to increased compensation related to Sipp claims.

In its latest Outlook industry newsletter, the FSCS says there is a “medium risk” that advisers that fall in the life and pensions intermediation class will be required to pay an interim levy.

Life and pensions advisers have already paid £33m in annual levies for 2014/15, compared to £13m the previous year. Investment advisers paid an annual levy this year of £112m, and could still face an interim levy of £30m relating to collapsed life settlement firm Catalyst.

In the newsletter FSCS chief executive Mark Neale says: “We try to provide as much certainty as we can for the industry about our costs.

“At the moment an interim levy is unlikely. However, in the life and pensions intermediation sector there is a risk because of Sipp provider claims. We are monitoring this closely and will keep the industry informed of any developments.”

The FSCS declared four advice firms in default last month following compensation claims relating to Sipp transfers against them. These included 1 Stop Financial Services, the firm run by Andrew Rees and Timothy Hughes, who were banned by the FCA in April for suitability failings in Sipp advice. In the first case of its kind, the men were ordered to pay their £490,100 fine to the FSCS.

The firms declared in default also included former Harlequin Property distributor Tailormade Independent.

The FSCS also report a 15 per cent in life and pensions intermediation claims last month, from 3,691 to 4,248 over the year. Neale said at the time he was “increasingly concerned” by the growing number of claims related to unsuitable advice to move from occupational schemes to “risky assets held within Sipps.”

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  1. Natalie: Thanks for this clearly written article. The newsletter issued by the FSCS yesterday gave me the impression that intermediaries were to bear the brunt of claims against SIPP “providers” which did my blood pressure no good at all.

    Whilst I’m clearly not happy at the mess caused by Harlequin et al at least I understand why I have to pay for them.

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