The hike in self-invested personal pension complaints to the Financial Ombudsman Service is expected to continue as misadvised clients and claims management companies bring forward cases.
The number of Sipp complaints referred to the Fos increased 86 per cent to hit 3,811 in 2018/19, up from 2,051 in 2017/18, according to the ombudsman's annual report published today (May 15).
Sipps also topped the list of the most complained about products against IFAs, with the ombudsman resolving 232 complaints with an uphold rate of 62 per cent.
The complaints body stated two thirds of Sipp complaints are now brought to the Fos by a third party, such as claim managers and law firms, up from a third in the previous year.
Although these third parties are generally acting in provider due diligence cases, not cases against advisers, according to the Fos.
Advisers and Sipp providers have told FTAdviser they do not expect this trend to slow down anytime soon with CMCs being particularly active in filing Sipp complaints to the Fos.
Andrew Pennie, head of pathways at Intelligent Pensions, said: "Sadly, there has been a significant increase in adverts by claims management companies for Sipp sales and potential redress.
"In this era of claims culture, many people see this as an opportunity for some free money, irrespective of whether they received good advice or not."
Greg Kingston, group communications director at Sipp provider Curtis Banks, said: "With Sipp complaints what we are seeing are problems with old investments still crystallising as these investments fail.
"It is too early to tell whether we have reached a peak but I sense that we haven’t and we will still see a few more of these type of complaints."
Alan Chan, director at IFS Wealth & Pensions, said he suspects there are still more clients who have been misadvised to take out a Sipp by their adviser and are poised to make a complaint.
He said: "Although most advisers have tightened up in this area of advice and do not recommend Sipps unless the client is, for example, sophisticated and has a real need for the additional features, I imagine there are still a number of clients who were mis-advised to take out a Sipp.
"It’s only a matter of time before they too make a complaint."
Fos chief executive Caroline Wayman this morning called on advisers to ensure consumers are making the right pension choices.
She said: "Investment and pension complaints are at their highest level in five years. While self-invested personal pensions can give consumers more control over how and where their pension funds are invested, consumers and advisers need to ensure
this is the right vehicle for them."
But many of the complaints centered on due diligence issues at providers. This kind of claim is often linked to pensions that ended up in high risk unauthorised investments which later failed.
There are concerns that the number of Sipp complaints may be misleading as often the complaint is against the investment in the Sipp rather than the Sipp itself.
Mr Kingston said: "I get frustrated when I see Fos Sipp complaints because in many cases the complaint is not against the Sipp but is against the investment itself.
"It is just that the Sipp is the only place the complaint can be directed to at that moment in time as the adviser has probably gone and the investment has not gone well, so the Sipp is the last party standing."
CMCs have caught on to these cases and are contacting investors inviting them to make claims, often for hefty charges of up to 30 per cent.
Mr Pennie said today's data could encourage even more CMCs to go after such cases. "The Fos data will likely encourage CMCs to increase their focus on Sipp sales and with a rise of Sipp sales in recent years, it is likely the number of complaints will continue to grow," he said.
CMCs have been under the supervision of the Financial Conduct Authority since April 1 and are currently undergoing authorisation processes.
Data out in April showed more than 900 claims management companies have registered to continue trading while they go through this process.
In order to receive FCA authorisation, CMCs must meet the threshold conditions, while management will be assessed for their skills, experience and suitability during the application process.
The FCA will also look at the complaints against CMCs submitted to the Financial Ombudsman Service.
The Fos does not collect data on how many of the claims made against Sipp providers involved advised clients. Where an adviser has gone out of business their clients may choose to claim with the Fos, which has a £350,000 claims limit, as opposed to the Financial Services Compensation Scheme, which can only pay out £85,000.
However, Mr Chan said this information would not change the fact that "Sipps are high risk products and should not be recommended to the average Mr Joe Bloggs".
Mr Chan said: "I would imagine a fairly high proportion of past complaints would be against the adviser as typically they did not advise on the underlying assets but just the product itself, ie, the Sipp, which we know cannot be deemed suitable advice as confirmed by the FCA.
"But then there are also a large number of complaints against the Sipp provider themselves for allowing them to invest in non-standard, toxic investments as part of the permitted range of assets."
amy.austin@ft.com
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