The board of Edinburgh-based Forthplus Pensions has written to financial advisers to inform them that the business will no longer be accepting applications for its international self-invested personal pension.
In a letter seen by International Adviser, chief executive Chris Holyoak described the decision as “disappointing” but sought to reassure advisers that the “matter is temporary”.
“Claims management companies representing UK customers are driving a huge increase in complaint cases across the industry. This trend, coupled with uncertainty surrounding the Adams vs Carey case has pushed insurance providers from the market and, as a consequence, we have been unable to renew or secure alternative professional indemnity insurance cover.
“We are now in the process of seeking to establish a protected cell to provide self-insurance but this is likely to take some time,” the letter said.
Ultimately, and with immediate effect, “the board of Forthplus have decided it is not appropriate for the firm to accept any new members, ie prospects and applications, until this is in place”.
Fully protected
Existing clients will not be affected by the move, the letter added.
Established Sipps “will be serviced as usual, contributions will be accepted, benefits will continue to be paid and investment instructions acted upon”.
“Your current clients’ assets also remain fully protected under the bare trustee structure Forthplus operate under.”
The board said it will “provide an update as soon as possible”.
PI troubles
The Forthplus update highlights an issue that many financial advice firms across the UK are facing when it comes to securing professional indemnity cover.
Costs have risen exponentially over the past few years, with many businesses choosing (or being forced) to exit the sector because they are unable to afford the eyewatering sums quoted by insurers.
It is an especially sore subject given that the growing PI costs come in tandem with rising levy payments – both of which are being driven skyward by poor practice in industry.
Advisers have frequently – and, in my view, rightly – complained that the good firms are being left to clean up the mess created by bad businesses (and individuals) that often go bust.
Cynics like myself have wondered if unaffordable PI cover might just be a way of shutting down the pension freedoms without the regulator actually having to take action.
Having not been consulted ahead of the announcement by then-chancellor George Osborne, the watchdog has been playing catch up ever since.
With the number of advice firms struggling to secure PI cover – the question has to be: how much longer will pension freedoms be freely accessible?
