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Advisers to pay £80m to compensate consumers for bad SIPP advice

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Life and pensions advisers will have to stump up £10m more than forecast this year to compensate customers who have received bad self-invested personal pension (SIPP) advice.  

The Financial Services Compensation Scheme (FSCS) said pensions advisers will pay a levy of £90m for 2016/17, up from a forecast of £80m, “to reflect a higher average cost of claims arising from advice about investments in SIPPs.”

Advisers in other sectors such as mortgage brokers will contribute less this year to the FSCS.

Mark Neale, chief executive of FSCS, said: “The annual levy allows us to compensate customers. That generates consumer confidence and trust in the industry.”

Many of the SIPP-related losses were related to investments in unregulated investment schemes, such as off-plan hotel rooms, fractional farmland and teak plantations.

An in-depth investigation into the SIPP industry carried out last year by the Financial Conduct Authority (FCA) saw the regulator ban advisers over unsuitable SIPP advice and many operators veto ‘esoteric’ investments.

Martin Tilley of Dentons Pension Management said: “It is a sad reflection that the intermediaries in this sector are still suffering through continuing high levies for the misdemeanours of predecessors, the majority of which are no longer in existence.”

Elaine Turtle, director at DP Pensions, said: “It is good to see the FSCS recognise it is the advice given on the investment in SIPPs that is causing the rise. Also it is a sad fact that a lot of the ‘advisers’ who gave the advice have now left the industry and therefore it is those left that are having to pick up the bill for something they were actually never involved with.”

Thinking of investing into unregulated investment schemes? Martin Tilley’s top tips:

  • Never accept promotional literature for unregulated schemes at face value
  • If its unregulated there is no one to verify the information is accurate
  • Do you own due diligence
  • Consult a regulated adviser for a professional opinion
  • Remember, if you go it alone you will not be covered for compensation
  • Ensure the SIPP provider has robust acceptance criteria for non-standard assets


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