The Financial Services Compensation Scheme (FSCS) has paid out £112m in compensation for self-invested personal pension (Sipp) related claims in 2017/18.
According to the FSCS' annual report, published on Friday (27 July), in the vast majority of these claims the customers invested in high-risk, non-standard asset classes within Sipps, "many of which become illiquid and potentially insolvent".
The amount paid out represents an increase of 7 per cent, from £105m in the previous year.
According to Mark Neale, FSCS chief executive, about 22 per cent of the claims handled by the organisation in 2017/18 arose from pension advice – "most commonly to transfer retirement savings out of an occupational scheme into a Sipp with a view to making illiquid and risky investments".
From the 6,360 new claims in 2017/18, 5,800 were upheld, with an average amount paid out of £26,793.
In January, the FSCS declared Sipp firms Brooklands Trustees, Stadia Trustees and Montpelier Pension Administration Services in default, when it also announced it would compensate investors in relation to at least 150 claims.
The organisation said it was expecting "a notable increase" in claim volumes in the coming year due to these cases.
In May, it was announced life and pension advisers will pay an extra £52m towards the cost of running the FSCS, as the overall levy is pushed up 21 per cent to £407m.
A string of failings around defined benefit (DB) advice set off the additional cost, which includes £10m set aside to pay for claims against a group of IFAs.
In their annual report, the FSCS said it has begun paying full and final settlements to customers with claims relating to DB pension schemes.
FTAdviser reported on Friday that the organisation is still considering whether or not it will pay out on claims relating to the failure of Lifetime Sipp, since the firm hasn’t been officially declared in default.