The UK’s Financial Services Compensation Scheme (FSCS) may still impose an interim levy on life and pension advisers despite a fall in the average cost of Sipp-related claims.
In December, the lifeboat fund’s chief executive Mark Neale warned UK advisers that they face paying extra due to the increasing number of claims about high-risk investments in self-invested personal pensions schemes (Sipps), which had more than doubled last year.
However, according to the FSCS’s latest forecast figures published on Wednesday, the cost of claims made regarding Sipps is now expected to be £146m (€171m, $181m), a lot lower to its January prediction of £163m.
This means that the total FSCS levy will be £15m less than was forecast in January and now stands at £363m.
Despite the fall in Sipps costs, the charge on life and pensions advisers remains unchanged at £100m, however the FSCS said it is keeping this “under review” and if it is required will “raise a supplementary levy later in the year to cover compensation costs above the £100m limit”.
This is to make up the shortfall in the £146m the fund is expected to pay out to UK aggrieved by poor life and pensions advice, in relation to their Sipps.
"Although the indicative forecasts we published in January and our final levy numbers this year are broadly similar, firms know that our levies can be unpredictable owing to the nature of some failures and the claims they generate.
“These are claims which arise from bad advice to move retirement savings from occupational pension schemes into a Sipp and to invest in risky or illiquid assets within the Sipp wrapper,” said Mark Neale, chief executive of the FSCS.