Back in April this year, the FSCS opened up potential claims for customers of pension provider, The Lifetime SIPP. This was a significant moment for all customers who have lost money in a SIPP- whereas previously the main focus for the FSCS had been advisors, now its attention was turning to providers as well.
The volume of case that have since hit the FSCS has been substantial. More than 200 claims had already been submitted by the end of July, and this number will surely increase. Although the FSCS has yet to formally declare Lifetime SIPP in default (which means they are considered unable to meet their liabilities), the fact it has invited claims in relation to them, and the fact Lifetime has more than £56 million in claims against them already, indicates this is surely just a matter of time.
The FSCS could be seen as taking a very bold step by inviting claims against the Lifetime SIPP. There are several on-going court cases currently that will hopefully establish whether providers owe a duty to carry out due-diligence on investments held in a customer’s SIPP. However the head of the SIPPs trade body has said “the FSCS risks going beyond its function of acting as a find of last resort”.
This is perhaps an understandable poison, given the current state of the SIPP market. The FCA has made clear its position. However, until the verdicts in the cases currently in Court are passed, the liability of providers is still being argued. There are 1000’s of customers who held their policy with Lifetime SIPP (and of course many, many more with issues regarding their SIPP provider) and it could be argued that the FSCS have jumped the gun a bit, by inviting claims before the firms liability is fully established.
The losers in all of this, as is sadly usually the case, is the customers. If, as expected, The Lifetime SIPP is declared in default the FSCS could find itself buried under a mountain of cases that need reviewing. Such a backlog, plus all the new cases behind it, will likely lead to delays in processing and delays in money due to customers being returned to them.