In the first quarter of 2016, the FSCS, which is funded by a levy on financial services firms, paid out £84m ($110m, €99.5m) in compensation for the life and pensions advice sector, compared to £35m for the whole of the previous 12 months.
Last year life and pensions advisers paid a levy of £120m.
“FSCS continued to see high volumes of self-invested person pension-related (Sipp) claims, involving advice given by financial advisers to invest in Sipps and to hold within these Sipps, investments in high-risk, non-standard asset classes, which have often become illiquid,” said the watchdog in a report.
The organisation added that the claims, which had begun in 2014/15, and had continued spiral this year, resulting from ‘an increasing population of failed adviser firms.’
Research shows average payments made in case against advisers who had recommended high-risk Sipp investments rose from £29,500 to £38,600, with the FSCS paying a total of £77m for all Sipp claims.
Around 60% of claims made by consumers against the life and pensions advice sector are now upheld, compared to 43% the previous year.
However, overall life and pension advice sector faced a total of 3,948 claims this year, 500 lower than the previous year.
Whistleblowers
Meanwhile, UK financial advisers have topped the FCA’s list of whisteblower cases, with the majority complaining about unregulated businesses.
In its annual report, the regulator said the number of whistleblowers for 2015/2016 was 170, down from the previous year when the number of cases was 270.
About 78 whistleblowing cases were connected to unauthorised businesses, 10 were related to Sipp providers while 23 involved asset management.
The FCA said it is improving the way in which it handles whistleblowers and introduced new rules last year.
“We want more whistleblowers to feel able and comfortable to come forward if they need to, so we have improved how we explain our role and how the overall process works from the whistleblower’s perspective – as well as increasing clarity on what they can, and can’t, expect from us in response to their information: for instance we now offer feedback to all whistleblowers at the end of their case,” it said.
