A Wrexham-based IFA which faced millions of pounds in pension switching claims has defaulted with the Financial Services Compensation Scheme.
In an update on its website the lifeboat fund confirmed Kingsway Wealth Management was now in default, paving the way for its clients, and that of its appointed representatives, to potentially receive compensation.
The advice firm entered administration in December last year, facing millions of pounds in pension switching claims linked to work carried out by its appointed representative Pension Transfers Limited.
According to an administrator's report for Kingsway on Companies House, its appointed representative arranged for pension switches from defined contribution schemes in 2009 and 2012 - which the clients then invested in a self-invested personal pension.
The FSCS declares a firm in default when it has received at least one eligible claim against it and is satisfied the firm will not be able to pay it.
In three separate cases the Financial Ombudsman Service had already ordered Kingsway to pay a total of £327,000 in relation to these pension switches, despite the advice firm arguing responsibility for the losses should also be shared between the clients, their IFAs and the Sipp provider.
According to administrators a claims management company had referred a further 24 cases of this nature to the ombudsman, which had not yet been ruled upon but could have resulted in claims of up to £1.6m.
Kingsway was advised to set aside £2.6m to cover any potential pension switching claims against its appointed representative, but according to administrators the advice firm faced up to £3.1m worth of contingent claims relating to advice given to invest in Sipps - but these claims had not yet been ruled on by the ombudsman.
Any outstanding claims with the Fos could be passed to the FSCS, which has already warned of a growing number of "more complex and more expensive" pensions claims pushing up regulatory costs for the advice industry.
rachel.mortimer@ft.com
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