Financial watchdogs have revealed close to £84 million compensation has been paid to retirement savers who lost money in dubious pension investments.
The Financial Services Compensation Scheme paid out the cash – mostly to do with claims against failed offshore property investments.
The FSCS revealed the compensation paid out in the past year was double the £35.2 million paid last year, which was double again the money paid out two years ago.
The reason for the high payment was blamed on large average compensation pay outs against IFAs recommending risky investments in SIPP pensions.
Compensation rose from an average £29,500 to £38,600 last year.
Last resort
The FSCS is the official body of last resort for investors and savers who have lost money as the result of advice from IFAs that has gone wrong.
In 15 years, the FSCS has paid £26 billion to more than 4.5 million clients of financial firms.
Only 8% of the cash paid out last year in SIPP claims involved complaints other than unregulated offshore property investments.
Many related to hotel resort developments that were stuck on the drawing board or which failed to complete in line with promises from developers. These deals tend to advertise high yields that never materialise even if the development is finished.
SIPPs are popular investments with expats working outside the UK on assignment, but who do not intend to live outside the country permanently.
Public confidence
Mark Neale, FSCS Chief Executive, said: “FSCS protection remains the same, following the EU referendum result, so does our aim to provide a trusted compensation service for customers that raises public confidence in the financial services industry. This is important because wider financial stability depends on FSCS performing effectively.”
In 2015-16, the FSCS report says paid out £271 million to 45,900 claimants.
Besides the huge SIPP pension pay outs, the two other categories with the most pay outs were £88 million to general insurance firm customers, which covers non-life products such as motor and employer liability cover and £77 million involving clients of IFAs which ceased trading.
Compensation payments are funded by a levy on financial firms.
In 2015-16, the financial services industry paid £1.09 billion to cover the management of FSCS and any compensation due
