The wording used in a FSCS note suggests SIPP providers are always at fault for investment problems and drags providers “through the dirt,” according to Dentons director of technical services Martin Tilley.
Tilley took issue with language in a note issued by the Financial Services Compensation Scheme (FSCS) regarding self-invested personal pension (SIPP) administrators being placed in default, as it appeared to suggest that it’s the responsibility of the provider to do due diligence on all investments they have accepted.
Last week, the FSCS declared three SIPP providers in default – Stadia Trustees, Brooklands Trustees, and Montpelier Pension Administration Services. In its notice, the industry lifeboat said the SIPP providers had failed to exercise due diligence on investments invested via their SIPPs.
The notice said: “FSCS is satisfied that there are claims where the conduct of the SIPP operators FSCS has declared in default gives rise to a civil liability to the investors because the SIPP operators failed to exercise reasonable care and skill, breached regulatory requirements, and/or breached trustee duties.”
Tilley said this sort of language was too simplistic and makes it sound as though each case is cut and dry – that if a consumer has a problem with their investment, it will always be the fault of the SIPP provider.
“A number of SIPP providers – ourselves included – and the Association of Member-Directed Pensions Schemes (AMPS) committee, are rather unhappy about what the FSCS has said. It’s not that they haven’t got a point, it’s just that they’ve oversimplified the point,” he said.
“The SIPP industry is not denying some SIPP providers have taken assets onto their books that they probably shouldn’t have done – but that’s old news.
“We’ve had the Financial Conduct Authority’s thematic review that tightened things up, and from 2013 and 2014 onwards, any SIPP providers accepting any asset that they shouldn’t have done really ought not to be doing what they’re doing.
“The stable door has been closed. Unfortunately, we’re still being dragged through the dirt because of a few providers from way, way back which have now come to fruition through the claims process.
“The SIPP market is now clean and tidy.”
Yesterday, AMPS said the FSCS had made the wrong decision when it accepted the claims on the basis that the providers failed to carry out proper due diligence of underlying investments held within SIPPs.
The body said it was “premature” of the lifeboat fund to assume a SIPP operator was responsible in law for due diligence on investments chosen by the member.
‘Frivolous claims and a rising FSCS levy’
Tilley felt the language used in the note could result in a flurry of “frivolous claims” being made against SIPP providers, and a rise in the FSCS levy.
“The worrying thing is that it’s going to encourage frivolous claims against SIPP providers,” he said.
“[A consumer] may see something has gone wrong, and throw a claim in, because the consumer has no cost to them, but the poor SIPP provider has to take everything on board and has to defend every claim, and reject the claim which then goes to the ombudsman, which could then go into the FSCS, and all that’s going to do is push up the levy, which charges the good guys.
“In short, it’s made me and a number of people quite cross.”
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