Financial Services Compensation Scheme  

FSCS starts paying out to clients of failed IFA

FSCS starts paying out to clients of failed IFA

The Financial Services Compensation Scheme has begun paying out against an IFA which is facing millions of pounds in pension switching claims. 

A total of £133,000 has so far been paid to three former clients of Kingsway Wealth Management after it defaulted with the lifeboat fund earlier this month. 

The FSCS told FTAdviser it had so far received 41 claims against the Wrexham-based advice firm, but three had been unsuccessful. 

Kingsway 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 documents on Companies House, the IFA's 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. 

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. 

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 been ruled on by the ombudsman.  

Any outstanding claims with the Fos could be passed to the FSCS, which last week announced its levy for the 2020/21 year had risen to £649m. 

The compensation scheme had set aside an extra £44m to meet claims for misleading advice against the collapsed London Capital & Finance, with advisers set to shoulder the majority of the bill as their levy rose by £16m to £229m. 

Advisers have since warned the increased bill could place "extreme pressure" on their industry, especially in light of financial challenges presented by the coronavirus pandemic. 

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