The Financial Services Compensation Scheme (FSCS) is expecting to face thousands of claims for mis-sold pensions after a major administrator went into administration.
GPC Sipp administered 3,200 SIPPs and another 50 Small Self Administered Schemes (SSAS pension trusts) with an estimated investment value of £130 million.
But it became insolvent after several ‘alternative investments’ failed – such as Harlequin Properties, a luxury hotel development that was never built.
The investments were made between 2009 and 2012, but when it became obvious there were problems all additional business ceased.
Scheme of last resort
The FSCS is what is known as a scheme of last resort and is empowered to pay compensation for financial claims if the firm involved goes out of business.
It was originally restricted to a maximum payout of £50,000 per claim, but in March that figure was increased to £85,000.
The scheme has now invited claimants to come forward and in a statement said: “FSCS is working closely with the firm’s administrators and is investigating the practices of GPC, specifically to establish what levels of due diligence were carried out by the firm, prior to permitting customers to make specific investments under their pensions.
“FSCS is aware that many GPC customers were advised by independent financial advisers to transfer existing pensions into a GPC Sipp.
Following the pension transfer, customers had their pension funds placed in high-risk, non-standard investments, many of which have become illiquid.
“FSCS has already assessed and paid a number of claims made against IFAs already declared in default by FSCS, in relation to advice customers received to transfer their pension into a GPC Sipp.”
The scheme has paid out 141 claims, but the claimants have since banded together to take legal action because the amount of money they received under FSCS regulations had left them out of pocket with their original investment.
Yet another group of investors has made a complaint to the Financial Ombudsman Service (FOS).
GPC is contesting both sets of complaints, said has been ‘a significant drain on resources’ and which eventually led to the insolvency.
High profile claims
There have been several high profile claims against SIPP advisors in recent months.
Liberty SIPP is to face claims from 700 investors claiming significant losses through unregulated pension investments advised by Liberty.
Lawyers investigating claims against another provider – Berkley Burke – estimate there will be more than 1,000 claims coming forward in their action.
Carey Pensions are awaiting the outcome of High Court claim regarding potential mis-selling which is seen by many experts as being pivotal on whether SIPP providers should take responsibility for unsuitable investments.