Sipp providers could face a wave of fresh claims, after the Financial Services Compensation Scheme (FSCS) identified three firms guilty of inadequate due diligence.
The new ruling could cause payouts to rise and inspire a surge in pension mis-selling claims to the Financial Ombudsman Service.
The three firms involved in the new ruling are Brooklands Trustees, Stadia Trustees, and Montpelier Pension Administration Services.
It’s estimated that approximately £34 million will need to be paid out after 150 victims made claims against the firms.
The FSCS specifically referred to ‘high risk’ investments in oil, foreign hotel rooms, and foreign vineyards. In many cases, consumers with modest funds and very little investment experience were encouraged to part with their savings.
Consumers were often recruited following cold calls from overseas introducers.
In 2011, Stadia Trustees was subject to a Financial Services Authority (FSA) inspection and later ceased trading. At the time, a note on the FSA register said: “Stadia will cease to accept all new business from new and/or existing clients for which it has Part IV permission with immediate effect.”
In 2013, the director of Montpelier Pension Administration Services was banned by the Financial Conduct Authority (FCA) for having an inadequate understanding of his firm’s regulated activities and responsibilities.
The FCA wrote to a number of Sipp firms in 2014 after it found ‘unacceptable’ and ‘significant’ due diligence failings on non-standard investments.
Montpelier Pension Administration’s clients have since been taken on by Curtis Banks while 1,000 Stadia Trustees clients have been moved to Mattioli Woods.
Mark Smith, Mattioli Woods’ chief operating officer has welcomed the FSCS’ decision to compensate victims who’d invested in non-standard assets.
He said: “As a Sipp provider you still have responsibility for the pension transfers you accept and the assets that members hold. As a result of the FSCS announcement, we expect to see that claims they have been pushing back for a while will now have to be dealt with.”