FSCS warns of more Sipp advice claims to come

FSCS warns of more Sipp advice claims to come

A recent dramatic spike in claims relating to poor advice given on non-standard investments held within self-invested personal pensions is likely to continue, the Financial Services Compensation Scheme has warned.

On Wednesday, the FSCS revealed that, during the 2015 to 2016 financial year, it paid out a staggering £83.8m on life and pensions claims, 92 per cent of which related to non-standard investments - such as unregulated offshore property - held in Sipps.

That was twice the 2014 to 2015 figure of £35.2m, which itself was twice the 2013 to 14 figure.

The FSCS was unable to provide insight into why there had been such a marked rise in claims relating to non-standard investments. However, a spokesperson told FTAdviser that it was not a one-off, saying: “We believe the trend will continue.”

He confirmed the FSCS had already received a significant number of similar claims for the new financial year.

However, the spokesperson was unable to specify when the investments in question were made, meaning there was no way of telling whether poor advice on non-standard investments was an ongoing problem, or an historic one.

The Financial Conduct Authority declined to comment.

Matthew Harris, director of Harris Independent Financial Advice, described the trend as “incredibly frustrating”.

He said he suspected the majority of the investments were in overseas properties, based on his reading of Financial Ombudsman Service reports.

“Regulated advisers should know better, but they’re attracted by the high commissions,” he said, adding that he had often received inquiries from investors trying to get out of these investments.

“But they’re impossible to undo,” he said.

When asked what he would like to see done about it, he said the FCA should consider an outright ban on regulated advisers recommending unregulated property.

Short of that, though, he said there should be more punative measures preventing offending advisers from setting up shop again after an advice firm had been shut down.