FSCS pays £1.7m in pension switching claims against IFA
Wrexham-based Kingsway Wealth Management defaulted with the lifeboat scheme earlier this year, which has now received 56 claims against the adviser.
In May, the FSCS had already paid £133,000 to three former clients, but this has since exponentially increased to compensation of £1,729,085 paid on 35 claims.
But not all claims have been successful, with FTAdviser aware of at least three that have been rebuked and denied by the compensation scheme.
Kingsway entered administration in December last year, embroiled in claims linked to work carried out by its appointed representative Pension Transfers Limited.
According to documents on Companies House, Pension Transfers arranged for pension switches from defined contribution schemes in 2009 and 2012, which the clients then invested in a self-invested personal pension.
In three separate cases prior to its collapse, the Financial Ombudsman Service had already ordered Kingsway to pay a total of £327,000 in relation to these pension switches.
This was despite the advice company arguing responsibility for the losses should also be shared between the clients, their IFAs and the Sipp provider.
Hefty bills
The bill to be shouldered by the FSCS, and ultimately the advice industry, could be set to grow even further, with documents showing Kingsway had originally been advised to set aside £2.6m to cover any potential pension-switching claims against its appointed representative.
But according to administrators, the advice company faced up to £3.1m worth of contingent claims relating to advice given to invest in Sipps, but these claims had not been ruled on by the ombudsman.
However, in an update in July, administrators revealed the adviser was “reviewing purported contingent liability claims” in the aftermath of the outcome of the Carey Pensions case.
Kingsway administrators said they were also considering challenging rulings against the company from the ombudsman, as a result of the Carey case bringing about “significant change” in how liability is determined in pension-switching cases.
Carey
In May, in the long-running Carey v Adams case, Carey, now known as Options Pensions, won the case after a High Court judge ruled the provider, which was explicitly acting on an execution-only basis, was not liable for a member’s choice to invest in a high-risk investment.
Russell Adams alleged Carey Pensions mis-sold him a Sipp. He and his lawyers accused the Sipp provider of using a Spain-based unregulated introducer to facilitate investments in Store First unit pods that were unsuitable and which he claimed were now “worthless”.
But the High Court threw out all of Mr Adams’ claims.
