The Association of Member-Directed Pension Schemes (AMPS), the body representing SIPP operators and SSAS practitioners, has voiced concerns about introducing a product levy to fund the FSCS and says the role of advice in causing later claims needs to be studied.

The body makes the comments in its response to the FCA consultation on the Financial Services Compensation Scheme (FSCS) funding (CP12/42).

AMPS has welcomed the consultation and says it awaits the outcome “with interest.” It remains “uncertain” as to whether a product provider levy is the best approach as would potentially hit Sipp providers even though they may only have been acting on advisers’ instructions on which investments to include.

There must be also due consideration given to the rules governing pension schemes that themselves allow riskier investments, says AMPS.

Geoff Buck, committee member at AMPS said: “It comes at a time when there are increased headlines under the banner of ‘SIPP claims lead to increased FSCS levies’. This has been a concern of AMPS for some time as claims becoming due have arisen from investments held within the SIPP but where some form of advice will have been received by the customer.

“These investments may also have been held in general investment accounts and/or ISAs so it is not correct for them to be reported as SIPP claims.

“AMPS supports the principles behind the FSCS and will be interested in how the proposed funding groups and provider levy proposals are received by the wider financial services industry. We have always been keen to see a funding group understanding the characteristics of the SIPP sector but we recognise the difficulty of achieving this as outlined within the consultation paper with other small groups.”

He added: “We see the consultation as a sensible step but it needs to go to the heart of the matter. The firms that introduce and sell the investments that most likely make up the significant number of failures seen through the compensation scheme need to be held accountable for higher claims but we do not agree that, by implication, product providers are necessarily responsible for this increase as they have sought to carry out investment instructions from clients after they have been through an advice process.”