The Financial Services Compensation Scheme (Sipp) is paying out to clients who invested their pension funds in high risk investments through three failed self-invested personal pension firms (Sipp), it announced on Friday (19 January).
The lifeboat scheme said it would compensate investors in relation to at least 150 claims against Sipp firms Brooklands Trustees, Stadia Trustees and Montpelier Pension Administration Services, which it declared in default.
The claims are in relation to high risk, unregulated, non-standard investments such as storage pods, oil fields, diamonds and overseas property.
The FSCS confirmed the action was related to the way in which the firms established, operated and administered the Sipps through which the consumers invested, signalling due diligence failings.
The body’s chief executive, Mark Neale (pictured), said: "We are satisfied in these cases that certain claims are eligible for compensation, and expect to receive more claims of this nature in the coming months.
"We will be getting in touch with customers of these firms as we may be able to help."
On Friday (19 January) the FSCS announced it was raising the levy collected from firms for the coming year by £16m, including raising more money from pension advisers as Sipp claims continued to mount.
For the nine months to March 2019, the FSCS is planning to levy the financial services sector £336m to pay compensation claims to customers who have lost out to bust companies.
Sipp firm Mattioli Woods said the decision could pave the way for compensation pay-outs to scores of investors as well as spelling wider ramifications for the sector.
A spokesman for the firm, which was appointed to assist Stadia Trustees when it was forced to cease accepting new business after varying its regulatory permissions in 2013, said it had helped to transfer the assets of about 1,000 clients to alternative pension arrangements with Mattioli Woods.
It estimated as many as 80 per cent of those had had some exposure to non-standard assets, with more than half having all of their pension funds invested in these.
Mark Smith, chief operating officer of Mattioli Woods, said: "Some members have had to endure an extended period of uncertainty about whether their pension assets were ever going to have any value.
"We are delighted that this arrangement will enable them to get back some or all of the money they have lost as a result of the transfer of their pension benefits from other existing pension arrangements to high-risk investments."
Mr Smith felt there might be wider ramifications for Sipp providers across the sector, especially those holding non-standard investments in their portfolios, typically unregulated funds, unlisted company shares and any property that cannot be sold within 30 days.
The Financial Conduct Authority (FCA) has already signalled a keen interest in the market.
In 2014 it wrote to Sipp provider CEOs highlighting risks within the market and accusing them of not playing their part in preventing scams and pension fraud.
It made it clear it expected Sipp operators to fully understand the investments allowed within their schemes.