Sipp compensation claims leave levy threat hanging over advisers

The threat of a further levy hangs over advisers due to increased compensation linked to Sipp claims. The Financial Services Compensation Scheme revealed there was a "medium risk" of more charges for 2014/15 for the life and pensions intermediation sub class in its latest newsletter.When the FSCS Budget was published earlier this year it said those in the life and pensions category would pay a levy of £40m, a rise from £13m.The body scrapped a planned £30m interim levy on advisers for 2013/14 back in February but warned at the time it was likely to be added to next year's bill instead.The risk of increased Sipp compensation claims is listed as the reason for the new "medium risk" warning.Last month the organisation said Sipp related claims against financial advisers who are no longer trading have continued rising. {desktop}{/desktop}{mobile}{/mobile} These claims related to advice given by firms to transfer funds from existing pension schemes to Sipps.All of the other sub-classes which pay towards the levy, including investment intermediaries, are regarded as having a "lower risk" of an interim levy, according to the FSCS's latest information.FSCS chief executive Mark Neale said: "We try to provide as much certainty as we can for the industry about our costs."Our new approach to funding aims to give the industry greater certainty and to reduce the likelihood of interim levies."At the moment an interim levy is unlikely. However, in the life and pensions intermediation sector there is a risk because of Sipp Provider claims."We are monitoring this closely and will keep the industry informed of any developments."As always, I should remind you that these are only indications; the picture can change as we move through the year."Last month's announcement on Sipp related claims against financial advisers who are no longer trading related to many cases where the Sipp fund was invested in non-standard asset classes. Many of these became illiquid.Officials said their experience of these claims was consistent with warnings published by the Financial Conduct Authority in relation to Sipps, including the FCA's alert that was published in April 2014.FSCS has been investigating the Sipp claims it has received to establish if the failed IFAs in question were liable. The body expects to be in a position to start processing claims in September.As a result of the FSCS investigations into Sipp claims, the below firms were declared in default:• TailorMade Independent Limited• 1 Stop Financial Services• Kynaston-Carnoustie Financial Consultancy Limited• Crawford Scott LimitedFSCS expects to see further similar failures.The FSCS levy for 2014/15 will be £313m for the financial services industry as a whole.

Sipp compensation claims leave levy threat hanging over advisers

Related items