The Financial Services Compensation Scheme has declared The Lifetime Sipp Company in default, opening the floodgates for claims.
The compensation scheme has already received about 400 claims, which will now be passed on to its claims team for assessment.
The Lifetime Sipp went into liquidation in April, leading the FSCS to start investigating the case for claims.
The self-invested personal pension provider had 3,600 unsecure creditors with liabilities amounting to £56.5m and by April 450 people had approached the FSCS for compensation.
Today (June 14) the body issued a statement saying: "FSCS has now concluded its investigations into the firm's practices.
"Our investigations have focused on the levels of due diligence Lifetime carried out prior to allowing customers to make specific investments under their pensions. FSCS has determined that protected claims exist against the firm."
It added: "Claims already submitted against Lifetime will shortly be passed to our claims processing teams for assessment. Around 400 customers are affected."
It is likely that Sipp providers will pick up the bill for the claims as opposed to advisers.
The administrators' final report out in April said it could take years for investor claims to be processed.
But the FSCS told FTAdviser at the time it expected the process to take months rather than years.
Lifetime Sipp collapsed last year after receiving claims from a number of unhappy investors with assets the likes of failed property scheme Harlequin.
The Sipp provider had 4,746 Sipps, including 2,018 troubled books, where the value of the underlying investments has been eroded.
In April the firm went from administration to creditors voluntary liquidation, meaning it went from trying to avoid insolvency to selling all assets before dissolving the company completely.
Large parts of the Sipp books, the untainted assets, had already been transferred to provider Hartley Pensions for £325,000 in May last year.