On 19 January 2018, the Financial Services Compensation Scheme (FSCS) announced that they will be paying out compensation to consumers who invested their pension monies in high risk, unregulated investments through three particular SIPP operators that were declared in default: Brooklands Trustees, Stadia Trustees and Montpelier Pension Administration Services. The FSCS advised that it would be compensating investors in relation to a minimum of 150 claims against the above mentioned SIPP providers.
The FSCS is a statutory fund of last resort for clients of authorised financial services firms. It serves as a protection for the consumers who have lost their money as a result of receiving negligent advice and/or being mis-sold a financial product such as a Self-Invested Personal Pension (SIPP) when the company responsible for that advice or selling them that financial product has been dissolved and/or no longer has the assets to reimburse its clients.
The FSCS deals with a large number of different claims, including claims against independent financial advisor firms and claims against SIPP providers. The claims against SIPP providers, where the client has not received independent financial advice, are usually classed as “complex” by the FSCS, which means that the FSCS is unable to provide specific timescales or guarantees in respect of the conclusion of such claims.
These complex claims are usually related to risky, unregulated, non-standard investments that are not suitable for retail clients, such as storage pods, overseas property or green fuel plantations.
The FSCS, was previously unsure of how to treat such SIPP claims, but it has now announced that, after consideration, they are of the opinion that some of the submitted claims would certainly be eligible for compensation. The FSCS is expecting to receive more SIPP claims in the upcoming months.
This is good news for clients who had invested their pensions into unregulated investments through SIPPs as the FSCS’ new position would enable them to get back some or all of the money they have lost as a consequence of the transfer of their pensions into a SIPP and the subsequent failure of the investment.
The FSCS has also stated that it is considering raising the amount it imposes on the financial industry by approximately £16m in order to meet the increasing influx of claims they have to deal with, including SIPP claims that continue to pile.
Some of the still active SIPP providers have chosen to stop the non-standard SIPP investments altogether, while others drastically decreased the non-standard investments they will accept.