The Financial Services Compensation Scheme has declared three financial advisers in default over self-invested personal pension transfers, in addition to the reported investigation into TailorMade Independent Limited.
The FSCS revealed that 1 Stop Financial Services, Kynaston-Carnoustie Financial Consultancy Limited and Crawford Scott Ltd have all now been declared in default as a result of investigations into Sipp transfer claims.
Harlequin distributor TailorMade Independent had already been placed in creditors voluntary liquidation, after going into administration in September, ceasing taking on new business on 20 January and launching a review of its advice processes.
Andrew Rees and Timothy Hughes, partners at 1 Stop Financial Services, have already been banned by the Financial Conduct Authority for advising nearly 2,000 customers on switching their pensions – valued at in excess of £112m – into Sipps. Half of that amount went to Harlequin.
Kynaston-Carnoustie and Crawford Scott are listed on the Financial Services Register as no longer active.
The FSCS stated that it should be in a position to start processing claims in September - and that it “expects to see further similar failures going forward”.
It added that it has received increasing numbers of claims against IFAs that are no longer trading, in relation to advice given to transfer funds from existing pension schemes into Sipps, which are often then invested in non-standard asset classes, many of which have become illiquid.
The FSCS previously predicted there would be an uplift in complaints in its annual report, published earlier this month.
Its 184-page annual report revealed the FSCS is dealing with “increasing volumes of claims relating to advice given to consumers to switch from conventional pensions to a Sipp”.
The FSCS’s come after the FCA warned back in April that advice to transfer assets into esoteric investments wrapped within Sipps is to come under a greater level of scrutiny. The FCA stopped short of the ban it placed on recommending unregulated investments to most retail clients.
However, the FCA may be changing its view after finding in its third thematic Sipp review, launched in October, that a “significant number” of Sipp operators were still failing to manage these risks and ensure consumers are protected appropriately, despite its recent guidance.
The failings identified put UK consumers’ pension savings at “considerable risk”, particularly from scams and pension fraud.
Furthermore, recent figures published by the Financial Ombudsman Service revealed that Sipp complaints rose to 241 from April to June this year, compared with 132 in the same period last year.
The majority of complaints were about the advice to invest in unregulated funds via a Sipp, the Fos said.
In May, the Fos figures revealed that Sipp complaints almost doubled to 1,039 cases in the 12 months to April compared with the previous year, with 63 per cent of complaints being upheld. The uphold rate has now dropped to 53 per cent.
