The chairman of the FSCS has said the body is “very keen” to meet the FCA to discuss the level of protection Sipp holders receive.
In the FSCS annual report Lawrence Churchill pointed out that while consumers will have 100 per cent protection for annuities and other savings held within long-term insurance contracts, a limit of £50,000 applies for investments, including those within a Sipp.
He said: “Following the liberalisation of retirement savings, which came into force in April 2015, consumers now have much more choice about their retirement savings, both as those savings build up and as they draw an income in retirement.
“But the protection they will receive from FSCS varies according to the products they buy.
“We are very keen, therefore, to discuss protection limits with the FCA and the PRA, as part of their forthcoming review of FSCS protection and funding.”
The 175-page report said total compensation in 2014/15 was £327m – excluding the major banking failures – up from £243m in 2013/14.
Compensation payments relating to the life and pensions intermediation sector rose to £35.2m in 2014/15, compared with £18.7m in the previous year.
The report said this was mainly because of a spike in Sipp-related claims, with the average compensation payment for a Sipp-related claim against IFAs going up by nearly 50 per cent to £16,375.
It said: “The increase in compensation mainly related to wrong advice being given to consumers by IFAs to transfer funds from existing pension schemes to Sipps.
“We expect Sipp-related claims to continue to rise in 2015/16.”
In March the increase in Sipp-related claims led to an interim levy on the life and pensions intermediation sector of £20m.
Investment intermediation also saw a rise in claims, which totalled 9,049 during 2014/15, compared with 7,823 in 2013/14.
| New claims received | Total decisions | Uphold rate | Average rate | |||||
| 2014/15 | 2013/14 | 2014/15 | 2013/14 | 2014/15 | 2013/14 | 2014/15 | 2013/14 | |
| Life and pension intermediation | 4,442 | 4,248 | 4,629 | 3,944 | 43% | 44.8% | £16,375 | £11,104 |
| Investment intermediation | 9,049 | 7,823 | 10,093 | 7,373 | 83% | 83.4% | £19,450 | £10,939 |
Adviser view
Simon Mansell, a financial adviser with Worcester-based Temple Bar Independent Financial Advice, said: “Why should an adviser with a low ‘risk’ exposure be asked to subsidise those with a high ‘risk’ exposure, especially where those advisers presumably charge their clients a premium for their Sipp advice?
“The FSCS should take a leaf out of the PI insurers’ book and reflect actual business activity and risk.”
Email: damian.fantato@ft.com
