The Financial Services Compensation Scheme has started receiving claims caused by bad advice to cash in defined benefit (DB) pensions.
Mark Neale, chief executive of the FSCS, said the organisation would shortly be publishing its final levies for 2018 to 2019, which would reflect this growth in claims.
He said: "Claims against pension advisers have been rising for some time. They mostly concern bad advice to move pension savings out of an occupational scheme and into a Sipp in order to hold risky and illiquid assets.
"In January we declared in default three Sipp providers themselves because of serious due diligence failures. And we are now beginning to receive claims because of bad advice to cash in benefits accrued under defined benefit schemes."
The FCA recently proposed an increase in the protection limit for bad advice to £85,000 from £50,000 because of the increase in people investing their pension funds on retirement in drawdown products instead of insurance-based annuities.
Mr Neale said: "That is very welcome. The question is whether that provides adequate protection now that we are beginning to see claims arising from bad advice to cash in defined benefit pensions where the value of pension rights can be in the hundreds of thousands of pounds."
But Mr Neale said the pension freedom reforms of 2015 were an idea "whose time had come" but said consumers would need help because they struggle with big financial decisions.
He said: "So people are faced with complex, high stakes choices, but often with imperfect knowledge and information.
"And this is where FSCS comes in. People need to know what FSCS protects and the scope of our protection."
He said the FSCS recently carried out research where it asked more than 2,000 people what they would do with an imaginary pension pot of £80,000 but some were told about FSCS protection for retirement savings and others weren't.
Mr Neale said: "The briefing mattered. The two groups made different choices about how to invest their pots.
"Those people who knew about FSCS were more likely to choose retirement products that have our protection. So, compared to the control group, they were less likely to invest in property or to buy shares.
"Interestingly, the group with knowledge of the FSCS were also more likely to take financial advice (which we protect) than those who were unaware of FSCS. This shows then that awareness of FSCS protection can make a difference."
damian.fantato@ft.com
