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More Sipp firms are going bust – here's what to do if your pension provider is one of them

Piggy bank
More pension companies are running into trouble Credit: PA

Another self-invested personal pension provider has entered administration leaving investors twisting in the wind and looking for answers about what happens next.

GPC, until recently known as Guardian Pension Consultants, has been declared insolvent by the Financial Conduct Authority, the City watchdog.  The Financial Services Compensation Scheme has also declared GPC in default, meaning investors can lodge claims against the Sipp with the lifeboat fund.

Last year, in the Sipp industry's annus horribilis, seven well-known providers collapsed or had to be rescued by other firms. In 2018 Carey, Greyfriars, Lifetime, Stadia Trustees, Brooklands Trustees, Montpellier and Liberty were brought down under the weight of complaints from pension customers. GPC has now joined their number.

Self-invested personal pensions (Sipps) allow individuals access to a huge range of investments as well as the tax relief available to all money saved into pensions. More than a million investors now use Sipps but some, often encouraged by rogue financial advisers, put their pensions into high-risk and unregulated schemes. Critics have said Sipps are partly to blame for allowing this.

GPC fell under the weight of almost 150 complaints against it that it could not pay from investors it allowed to invest in these risky schemes, predominantly Harlequin Property. An overseas development not regulated by the FCA, Harlequin took around £300m from British investors and, despite promises of "guaranteed returns", gave them virtually nothing in return. 

Years of light-touch regulation mean some providers hold hundreds of millions of pounds of these investments. Regulators and the courts are now catching up, pushing firms to edge as compensation claims pile up. 

So, what should you do if your provider collapses, or you suspect it will soon?

Should I panic?

No, but you need to investigate. A Sipp business can go bust for several reasons, often as a result of action by the Financial Conduct Authority (FCA), a regulator, which may be unhappy with the way the business has been run or the kinds of investments the firm has allowed customers to hold. 

Rushing to cash in your investments, particularly if the Sipp is in a drawdown account, may be the least sensible option.

Are my investments at risk?

Not necessarily. These are held in trust outside of the Sipp business and should be safe. A Sipp firm going bust is unusual, more often than not a provider that is in difficulty will look to sell or transfer the business to another more financially secure provider.

What happens if my Sipp company is sold?

If the Sipp is transferred to another provider you may be given a choice to transfer to an alternative of your own choosing. If not, then once transferred to the company that has bought your Sipp, you could request a further transfer, though there may be an additional charge for this. See here for list of the cheapest Sipps currently available.

What financial protection do I have?

If a Sipp provider goes bust then usually the investor would be able to make a claim to the Financial Services Compensation Scheme. Currently the limit is £85,000 per claim, having increased from £50,000 in April. There are suggestions of a further increase in the future.

The FCA is warning investors in recently failed Sipps to beware cold calls from fraudsters pretending to be from the pension or its administrators. If in doubt, hang up, search online for the genuine phone number for the organisation or company you are trying to contact and phone them directly.

Will I lose access to my account?

This will depend on the circumstances and what stage has been reached in the winding up process. In these cases it is quite common for an administrator to be appointed, usually a firm of accountants. They will try to find a buyer for the business and will take over the running of the Sipp business in the interim so you don’t lose access.

I need to sell assets quickly to release cash. Will this be a problem?

Again this will depend on the circumstances. It’s normally not possible to access pension cash before age 55 without penal tax charges. Thereafter you can take advantage of the flexibilities afforded by the "pension freedoms".

Provided your Sipp investments are genuine, legal ownership of those investments should not be in doubt and whoever is currently running the Sipp business should be able to help you.  

Who do I speak to for details of my investments now?

In the first instance you should try your customer services contact at the Sipp company. If they are no longer in charge of administering your pension they must tell you who is. If you have a financial adviser they will be able to help, too.

Who do I complain to?

You may be able file a complaint and possibly ask for compensation via the Financial Ombudsman or Pensions Ombudsman

I just paid my annual fees, will I get a refund?

If your Sipp  is still active and being administered, this is unlikely.

I want to move my Sipp but I have some distressed assets and no Sipp company will take them. What are my options?

This is more difficult. If you really want to move you may have to cash in all your investments and potentially suffer a significant financial loss. It may be better to sit tight and instead pursue the compensation routes outlined above.

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Much will depend on how you came to hold those investments and who recommended them to you. You may want to make a claim they were wrongly sold to you by your financial adviser or you may be able to claim against your Sipp for accepting the assets in the first place. 

How do I choose a Sipp company that won't go bust?

There are no guarantees. Generally, larger Sipp providers will have more financial resources and cash reserves. Hargreaves Lansdown and AJ Bell, for instance, are listed companies in their own right and thus are subject to extra scrutiny from institutional investors and analysts. 

However, even larger Sipp firms are known to have ongoing regulatory issues, which could materially affect their financial strength. It does not take many large claims to sink a once successful firm. The best course is to diversify your portfolio so you always have access to at least some ready cash.

laura.miller@telegraph.co.uk