Ombudsman complaints data showed a 123% rise in claims for the three months leading up to December 2013 regarding Self-Invested Personal Pensions (SIPPs).
The statistic appear to support the industry compensation scheme’s recent warning that advisers should brace themselves for a steep rise in SIPPs claims in 2014.
Highlighted in the Financial Ombudsman Service’s monthly newsletter, the data shows a jump from 176 claims in the third quarter of 2013 to 393 in the fourth quarter.
“The awareness of SIPPs has certainly increased over time and this has led to more interest in them as a possible alternative to other pensions,” notes Axa Wealth Specialist Products technical manager Tony Parker
“The economic environment, along with more of a focus on pensions from a media and regulatory perspective, has led to more analysis of value for money for consumers.”
Whilst this may go some way to explain the rise in claims, there may very well be other issues at stake.
As the provider of the SIPP is, in effect, the trustee of the scheme, they have to ensure the investments are bona fide, won’t result in any negative liabilities, and that the client understand the terms and conditions.
This may have caused some of the issues.
Robert Graves of Rowanmoor Group notes: “There have been some high profile cases where investments have gone wrong.”
“There have been cases taken against SIPP providers along the lines of ‘why did you allow me to invest in this when it’s gone wrong’.”
SIPPs providers can impose investment lists, but many prefer to give their clients the flexibility to choose from a larger scope of investments.
In addition, many savers who take out SIPPS for the increased freedom and not fully aware how this equates to increased charges.
These charges, which have risen in line with inflation (although also fallen in some instances when an online execution-only service is offered), increase sharply when ‘surplus’ investments are made.
As of last year, Fidelity’s FundsNetwork SIPP charged GBP 116 as an initial fee, which gives the client free range over its “core investments” – stray beyond these offerings and the price almost triples to GBP 339.
Around the same time as the results, the Financial Services Compensation Scheme gave its warning that levies for investment intermediation advisers would rise to GBP 105 million – a 38% rise – for the 2014/2015 financial year.
The organisation’s plan and budget 2014/2015 also stated that life and pension advisers will see a 32% increase, and stated the surge in self-invested pensions claims fueled the hike.