The Financial Services Compensation Scheme has received 1,474 claims against collapsed self-invested personal pension (Sipp) provider Berkeley Burke, which could see the scheme pay out more than a hundred million pounds in compensation.
The lifeboat scheme told FTAdviser it is due to pass the claims on to its claims processing teams after it found at least one of them to be eligible.
The lifeboat scheme put Berkeley Burke into default yesterday (April 1) and claims will now be processed to determine the level of compensation payable to clients affected.
The FSCS’s investigations into the defunct provider focussed on due diligence failings before allowing customers to make unregulated investments with their pensions.
It is not known how much the compensation amount will be just yet but the administrator of Berkeley Burke’s Sipp arm, Adrian Allen, previously estimated the FSCS could end up footing a claims bill of up to £158m.
The scheme pays a maximum of £85,000 on individual investment claims, amounting to £125m if all claims received to date are eligible for the maximum payout.
The FSCS said it was aware that independent financial advisers recommended many Berkeley Burke clients to transfer their existing pensions into a Berkeley Burke Sipp and has already paid out £54m on 1,400 claims against IFAs.
After the transfer, customers had their pension funds placed in high-risk, non-standard investments of which some have since become illiquid, which means they can’t be sold or traded.
Berkeley Burke went into administration last year because it was unable to cover the cost of defending claims made against it in relation to high risk investments made between 2010 and 2012.
This was after it dropped its appeal against a Financial Ombudsman Service decision from 2014 which ordered it to compensate a client after it failed to carry out adviser-style due diligence on his investment.
The Court of Appeal decided to let Berkeley Burke appeal the decision last year after it said the decision was potentially one of "considerable and wider importance within the industry and for customers". But it was dropped in October because of a lack of funding.
Following its collapse RSM, the company appointed as administrators, announced the Sipp arm of the business would be sold out of administration in a pre-pack deal with Hartley Pensions.
But Hartley Pensions did not take on liability for the outstanding claims, meaning they would land at the FSCS.
The remaining Berkeley Burke group has no ties to the now defunct Sipp business and no other companies within the group are affected.
amy.austin@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
