The Financial Services Compensation Scheme has paid out £53.2m in claims against IFAs in relation to pension transfer advice.
The lifeboat scheme told FTAdviser that to date it has paid out £53m on a total of 1,385 claims against IFAs who advised clients to transfer their pension into a Berkeley Burke Sipp.
Following the transfers clients had their pension funds placed in high-risk, non-standard investments, many of which have now become illiquid.
The lifeboat stated: “FSCS has already assessed and paid a number of claims made against IFAs already declared in default by us, in relation to advice customers received to transfer their pension into a Berkeley Burke Sipp.”
Last week (September 19), the FSCS announced it is now accepting claims against Berkeley Burke Sipp Administration Limited after the Sipp provider entered administration.
Berkeley Burke’s Sipp arm went into administration because it was unable to cover the financial costs of defending claims made against it in respect of alleged due diligence failings when accepting high risk investments.
Immediately after being appointed administrators RSM announced that the Sipp business would be bought out of administration in a pre-pack deal with Hartley Pensions.
The FSCS has started to accept claims against the provider itself but will not pass these on to its claims processing teams for assessment before it has established whether they are in fact eligible, meaning the firm owes a civil liability to its customers.
Neil Stockdale, partner and head of financial litigation at Hugh James Solicitors, said he has started to contact clients to handle any claims that arise against Berkeley Burke.
Mr Stockdale said: “We are writing to our clients to provide detailed advice on the implications of this development. We represent a large group of investors and will see seeking to ensure that their interests are fully protected.
“We will now be handling FSCS claims and liaising with the Financial Ombudsman Service as well the FCA.”
He added: “I am very concerned to ensure that the FSCS deals with these cases promptly and pays compensation that properly reflects the values of lost pensions.
“We will also be pressing the FSCS to confirm that it will offer to take assignments of the Sipp investments as this will enable our clients to finally close their Sipps and avoid paying any further fees."
Even though the investments in the Sipps are illiquid, the investment contracts still exist, Mr Stockdale explained.
This means the investment will have to be removed from the Sipp for it to be closed and to stop incurring fees.
The FSCS needs to enable the investment to come out of the Sipp to allow it to close.
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