The Financial Services Compensation Scheme has paid out nearly £77m in claims relating to Sipps, according to its annual report.
The scheme’s report showed it continued to see a high volume of claims involving advice given by financial advisers to invest in Sipps and to hold within them investments in high-risk, non-standard asset classes, which have often become illiquid.
The FSCS said this trend began in 2014 to 2015, but continued during 2015 to 2016 with claims against an increasing number of failed adviser firms.
In fact, the FSCS paid out a total of £83.8m in compensation for clients of life and pension intermediaries during 2015 to 2016, meaning only £6.8m was not Sipp-related.
Compensation payments relating to life and pension intermediation more than doubled, from £35.2m in 2014 to 2015.
Only general insurance provision saw more compensation paid out during 2015 to 2016, with £87.6m handed out by the FSCS while investment intermediation compensation amounted to £77.1m.
Investment intermediation saw the most new claims, at 16,256, but average payments were lower at £6,832.58 compared to £34,254.16 for life and pensions intermediation, which had the highest average payment.
The FSCS received £119m in levies from life and pension intermediaries while £115m was levied from investment intermediaries.
Mark Neale, chief executive of the FSCS, said the cost of running the scheme was down by almost 8 per cent, with management expenses at £66m in 2015 to 2016, compared with £71.5m in the previous year.
He said: “Importantly for our levy payers, during 2015 to 2016, FSCS achieved full recovery of the compensation paid following the failure of Icesave in 2008, bringing the total recovery retained by FSCS from Icelandic banks to £3.65bn.
“In addition, we recovered £130m in respect of Keydata Investment Services.
“FSCS protection remains the same, following the EU referendum result, so does our aim to provide a trusted compensation service for customers that raises public confidence in the financial services industry.
“This is important because wider financial stability depends on FSCS performing effectively.”
During the year Mr Neale received a total remuneration of between £325,000 and £330,000, including a salary of between £255,000 and £260,00 and a performance-related bonus of between £30,000 and £35,000.
Gary Nettleingham, managing director of Essex-based Catalpa Financial Planning, said: “Any IFA should really go through the process if they are recommending a Sipp and look at the underlying investment as well.
“It is the responsibility of the adviser to make the recommendation for the investment, not just the tax wrapper.”
The FSCS paid £83.8m in compensation for clients of life and pension intermediaries between 2015 and 2016.
Only £6.8m of that compensation was not Sipp-related.