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Sipp firms under pressure to raise fees as FSCS levies soar

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Sipp customers may have to pay higher fees as providers see the cost of complying with regulation soar 75 per cent this year.

Legal & General-owned Sipp firm Suffolk Life warns total regulatory costs have jumped 75 per cent, driven by the increased Financial Services Compensation Scheme levy which it says could be as as much as 150 per cent higher than 2014.

Head of communications and insight Greg Kingston says some firms may have to increase client fees if levy costs and protection limits rise.

New capital adequacy requirements on providers also come into effect in September 2016.

Kingston says: “FSCS costs for Sipp operators have not come under scrutiny since 2011, when the then record interim levy drove some Sipp providers to consider interim and immediate one off charges to their investors.”

He adds: “Our estimates show that SIPP operators will experience a rise in the FSCS fee by as much as 150 per cent in 2015 and, should the level of FSCS protection available increase along with the volume of claims, these fees will continue to rise.”

Payouts against life and pension advisers have jumped 88 per cent over the last year from £18.7m to £35.2m, according to the FSCS’s annual report published this month.

The amount of compensation for Sipp claims against advisers has risen by 50 per cent.

Average payments rose from £11,104 to £16,375 this year, triggering a £20m interim levy on life and pensions intermediaries announced in March.

The FSCS says complaints and payouts related to Sipps are “likely to rise steeply” next year, despite the overall number of new claims across all products falling from 39,258 to 31,762 this year.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I’m afraid it doesn’t matter if you write SIPP business or not, the FSCS have still increased their fees to extortionate levels.

  2. Douglas Baillie 29th July 2015 at 9:52 am

    Maybe the FOS are making too many wrong decisions, leaving the defendant with no right of appeal?

  3. @Douglas Baillie – i would tend to feel that you are probably right. Strikes me however that people who buy things – whether they be cars, computers, lawn mowers, tvs, or pensions have a duty to understand what they are buying just as much as the person selling those things has a duty to explain things properly. We live in a world where consumers are assumed to be stupid and advisers are assumed to be conniving and cunning – its very wrong

  4. Re’ Brian Gannon comment – Brian, I couldn’t agree more. The mind-set of investors in this country is continually moving away from one of taking responsibility to one of ‘who can I blame for my decision if it doesn’t work out the way I want it to’. I think that is a mind-set that is being created from numerous quarters who have a vested interest in doing so. There is a Claims Management Company advertising on daytime TV right now with adverts that ask viewers if they have ‘lost money in an investment’ and if so, that company will get that money back on a no win-no fee basis. Really?? I visited their website and learned that if you had been ‘sold’ an Investment Bond by a ‘commission hungry’ salesman – they will get your money back for a mere 35% +vat. A snip at the price when the commission hungry salesman had the audacity to take between 3% initial plus a possible 0.5% ongoing for his/her advice.

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