FSCS levy on Sipps under fire

FSCS levy on Sipps under fire

The Association of Member-Directed Pension Schemes has hit back at suggestions that providers of self-invested personal pensions (Sipps) should be liable for levy hikes made by the Financial Services Compensation Scheme (FSCS).

The personal pension industry body stated it was uncertain whether a product provider levy could be the best approach and questioned if it would necessarily collect a levy from the most appropriate parties that could lead to future claims against the FSCS.

The trade body added there should be due consideration given to the rules governing pension schemes that allow riskier investments.

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The scale and impact of FSCS levies have risen sharply for some firms since the rules were last reviewed in March 2013.

AMPS stated the consultation on options for changing both the funding of the FSCS and the coverage it provides to consumers is welcomed.

Geoff Buck, committee member at Amps, called the FCA consultation a “sensible step” but urged the regulator to look into the firms that sell the investments, as these likely make up a significant number of failures seen through the compensation scheme.

He did not agree that, by implication, product providers are necessarily responsible for higher levies as they have sought to carry out investment instructions from clients after they been through an advice process.

Accusations of Sipp claims causing increased FSCS levies have been a concern for some time, according to Mr Buck, as claims have arisen from investments held within the Sipp but where some form of advice will have been received by the consumer.

He added these investments may also have been held in general investment accounts or an Isa, so it is not correct for them to be reported as Sipp claims.

“Amps supports the principles behind the FSCS and will be interested in how the proposed funding groups and provider levy proposals are received by the wider financial services industry.

“We have always been keen to see a funding group understanding the characteristics of the Sipp sector but we recognise the difficulty of achieving this as outlined within the consultation paper with other small groups.”

Francis Klonowski, principle at Klonowski & Co, said the fault often lies with the adviser who recommended the investment rather than the company that offers the investment.

Even if an investment is permitted in a Sipp, this does not automatically mean that it is suitable for the client.

“This is not for the Sipp or Ssas provider to decide or monitor, and therefore they should not be asked to fund a levy to meet compensation claims.

“The blame should be placed on those giving the advice, and the recompense should come from them and their firm,” Mr Klonowski said.

But Christopher Foster,  partner at Pennines Independent Financial Advisers, said some Sipp providers have knowingly accepted investments that were not suitable for clients and some continue to take fees for managing investments that are known to be failed.