FSCS reports rise in 'more complex' SIPP failures

The Financial Services Compensation Scheme (FSCS), the industry-funded safety net for consumers, has warned it is seeing a rise in more complex SIPP claims after it paid out a total of £423m in compensation in its 2023/24 year. The FSCS said there had been a rise in, "larger, more multi-faceted" SIPP failures which were taking longer to deal with. The total compensation bill for all claims was up £20m from £403m the previous year to £423m in 2023/24 but this was significantly lower than the 2021/22 year when PPI claims were near a peak with total claims close to £600m. Some £262m of the total compensation bill in 2023/24 was the cost of the FSCS’s claims service over the past year, which includes claims for investments, pensions and financial advice. The figures are included in the FSCS Annual Report and Accounts and Class Statements published today. Among key facts from the Annual Report: 9,723 decisions on claims were made and 19,008 people compensated Previous CEO Caroline Rainbird, who left in June 2023 after four years with the body, received £105,707 for loss off office as part of a salary and fees package worth between £325,000 and £330,000 for the year New interim CEO Martin Beauchamp, who joined in October 2023, is on a package worth between £225,000 and £230,000. Chief financial and people officer Fiona Kidy, who stood in as CEO after Caroline Rainbird’s exit, is due to earn a total package worth between £320,000 and £325,000 in the current FSCS year. The body said it was dealing with more complex claims compared to recent years, particularly in the SIPP sector. The proportion of more complex claims, mostly linked to customers’ retirement savings, has increased from around a third to two-thirds. The FSCS recovered £54m from failed firms with the majority (approximately £52m) used to offset FSCS levies for firms. The remaining £2m was passed on to customers whose losses were above the FSCS’s compensation limits. Some £160m of the pay out was for customers of failed insurers and £1m was for deposits held with failed credit unions. The FSCS said it paid compensation to customers who had experienced losses from 447 different authorised financial services firms, including the 51 that the FSCS declared in default during 2023/24. The body closed 14 complex firm investigations during the year that each averaged 15 months of work. Following these investigations, all but one resulted in the decision that compensation may be owed. The FSCS said despite the high workload of complex cases it maintained a customer satisfaction score of 84% during the year. Martyn Beauchamp, FSCS interim chief executive, said: “In 2019, 31% of our claims were what we would class as straight forward, for example for mis-sold payment-protection insurance (PPI). That number is now approximately 5%. “Meanwhile, the proportion of more complex claims, mainly linked to customers’ retirement savings, has increased from around a third to two-thirds. This has resulted in the amount of evidence we receive per claim increasing by 89% since 2021/22. At the same time, we are dealing with larger and more multi-faceted failures such as SIPP operators that require more time, expertise and resource to investigate.” Mr Beauchamp said the FSCS in April had opened an in-house contact centre as part of a move to expand in-house expertise and handle more complex claims that now make up most of our work. The FSCS is funded by levies on 41,826 regulated firms. The levy for 2023/24 was £473m, £39m higher than 2023/23. FSCS’s Annual Report and Accounts and Class Statements are available from the FSCS website.

FSCS reports rise in 'more complex' SIPP failures

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