The Financial Services Compensation Scheme (FSCS) has received more than 2,000 claims for compensation from customers of two failed SIPP providers.
Berkeley Burke and Liberty both received pensions transferred from other schemes and then invested them in high risk, non-standard investments which later failed.
Now both companies have themselves failed and the outstanding claims against them have been referred to the FSCS which has the power to refund claimants money as a fund of last resort.
It is understood that the scheme has received 1,562 claims against Berkeley Burke which went into administration in September 2019 and has paid out £141,000 shared by four claimants.
The remaining 518 claims are against Liberty which went into administration in April of this year and the FSCS has not yet had time to process any of them.
Not all the cases are about SIPPs (self-invested personal pensions}. The remainder are about other pensions advice and unregulated collective investment schemes.
£8.5 million in liabilities
Administrators of yet another SIPP firm have estimated that it could be faced with £8.5 million in liabilities related to non-standard investments.
The Guinness Mahon Trust has been wound up and the FSCS is now accepting claims.
It has already accepted there could be massive compensation payable if there is ‘adverse adjudication’ by the Financial Ombudsman Service (FOS) who are currently investigating the cases.
The FSCS has joined forces with the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS) and the Insolvency Service to combat a practice known as phoenixing whereby an advisor closes one company and then starts another with no responsibility for outstanding claims against the first.
It is understood that more than 100 advisors have been reported to the FCA for the currently legal practice.
Refuse to authorise
However the FCA can refuse to authorise a new firm where it suspects attempted phoenixing.
FCA director of authorisations Sarah Rapson said: “We have a shared responsibility to protect consumers and, by working closely together, we can prevent firms and individuals from deliberately avoiding their liabilities.”