FSCS Finds SIPP Audits Inadequate
Self-Invested Personal-pension (SIPP) providers can expect to see an influx of new claimants after a recent audit by the Financial-services Compensation Scheme (FSCS) found these providers to be providing investment services that were inadequate.
Increase in FSCS Claims
It has been advised that this ruling may cause a sizeable increase in FSCS compensation; with declarations being made against several defaulting SIPP firms. These payouts have thus far been totalled in excess of £34 million. The defaulting firms which have been named in the findings are Brooklands Trustees, Stadia Trustees, and Montpelier Pension-Administration Services; with claims against them being in excess of 150 and the FSCS are still expecting more claims within the 2018/19 period.
Two of these firms, Stadia Trustees, and Montpelier Pension-Administration Services, may be familiar to some persons because of previous legal issues with persons attached to these firms.
However, compensation will only be made by the FSCS after a valid claim has been made against any one of these firms.
“It has been advised that this ruling may cause a sizeable increase in FSCS compensation; with declarations being made against several defaulting SIPP firms. These payouts have thus far been totaled in excess of £34 million.”
Movement of Clients
Some of these firms have had their clients transferred to other firms after the services of these firms were brought to an almost immediate halt.
The decision by the FSCS to offer compensation to these clients has been seen as a welcome move as the firms which were found to be defaulting may have been investing in non-standard assets. The majority of the clients that have been transferred to other firms had all their pension funds invested in non-standard assets.
Responsibility of SIPP Providers
SIPP providers are still liable for the pension transfers that are accepted by them as well as the assets that are held by the members of your firm. It is thus expected that all claims that were previously delayed will be dealt with in a timely manner.
Inadequate or High-Risk Investments
It was found by the FSCS that several investments that were accepted by the defaulting SIPP were a very high risk. Some of these investments were oil investments, foreign hotel room investments and foreign vineyard investments.
These investments were found to be made by individuals who lacked proper investing knowledge or whose funds were inadequate for the investments that they wished to make.
Several of these investments were made after a marketing call.
The FSCS has expressed its satisfaction in the fact that there were several SIPP claims whereby the performance of these SIPPS was found to have defaulted from standard procedures and thus will be held liable since they failed to perform within the standard procedures and thus breached their trustee agreement.
This decision may have further implications, not stopping at the FSCS, since other clients may be encouraged to come forward with their claims. It is expected that the Financial Ombudsman Service (FOS) should also accept claims in keeping with the FSCS decision to do so.
It has been noted that it is however in the best interest of all parties for the FOS to accept SIPP claims as well. In this regard, it has also been noted that some of these claims have been settled by SIPP providers after having been brought to the FOS.