FSCS declares collapsed Sipp provider in default

FSCS declares collapsed Sipp provider in default

The Financial Services Compensation Scheme has put troubled self-invested personal pension provider GPC Sipp in default after it received eligible claims against it.

GPC Sipp, formerly Guardian Pension Consultants, was declared in default yesterday (February 17) with the lifeboat scheme having received 799 claims for compensation against the provider.

The FSCS said it was “still too early to give a figure for compensation payments”.

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A declaration of default means FSCS is satisfied a firm is unable to pay the claims for compensation made against it. 

This then paves the way for clients of that firm to bring claims to the FSCS.

An FSCS investigation into the Sipp provider had focused on the levels of due diligence GPC Sipp carried out before allowing individuals to make specific investments with their pensions.

The lifeboat scheme has already assessed and paid out on claims against authorised IFAs in relation to advice they received to transfer their pension into a GPC Sipp.

GPC Sipp entered administration in June 2019 due to problems with the investments in its Sipps - several of which failed, such as Harlequin Properties, a £400m project involving a luxury hotel development that was largely never built. 

The 3,000-strong Sipp and Ssas books, including both assets and the clients, were then bought by Hartley Pensions Limited in August 2019 for £482,000.

A report by administrators Smith and Williamson, filed with Companies House at the beginning of the year (January 15), showed that GPC Sipp owed £1.2m to unsecured creditors, which included HM Revenue & Customs, employees and customers.

Six of these had already submitted claims but they were not identified by the administrators.

The report also acknowledged that there would be a significant number of claims to come from the FSCS and other clients of GPC Sipp which had not yet been accounted for.

A number of Sipp operators have been hauled up on their level of due diligence when accepting unregulated investments into Sipps.

Berkeley Burke Sipp dropped its appeal against a Financial Ombudsman Service decision from 2014 which ordered it to compensate a client after it failed to carry out adviser-style due diligence on his investment, in October.

The profession is also awaiting the outcome of the Carey Pensions trial which concluded in March 2018 and will also have ramifications for the industry.

The Adams v Carey Pensions High Court case also centred on the question of provider responsibility when accepting investments into a Sipp and touched on similar issues to the judicial review case brought by Berkeley Burke.

Many claims against Sipp providers on the due diligence they conducted on underlying investments are in relation to business that took place before July 2014, when the FCA made it clear Sipp operators should be doing due diligence to a high degree on any asset they accept within their book.

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