The Financial Services Compensation Scheme has U-turned on a previous decision and will now protect Hartley Sipp members by paying compensation for the exit and administration charge.
In an update, published today (January 29), the lifeboat scheme said further evidence collected this month has allowed it to pay out on claims from Hartley members that are due to be charged the EAC directly.
Back in December, as reported by FT Adviser, the FSCS said it did not have enough evidence and the EAC would not be protected under its rules.
The EAC is intended to cover costs, including the costs for customers to transfer to other regulated companies where possible, until Hartley’s administration is concluded.
The FSCS stated: “In our previous update, we said that based on the available evidence at that time we could not protect Sipp members for this charge as we did not believe there was a protected claim under our rules.
“FSCS must make decisions based on the information available to it at any given time.
“The further evidence obtained by FSCS during January 2024 has now allowed us to reach the view that protected claims do exist for all Hartley SIPP members who were due to be charged the EAC directly.”
The FSCS said it is now working with the joint administrators at UHY Hacker Young to arrange the compensation payment.
“Hartley’s Sipp members do not need to do anything at this time. We will provide a further update once we have confirmed these payment arrangements,” the FSCS said.
What is the EAC?
UHY Hacker Young has applied to court to ratify an ‘exit and administration’ charge that the administrators would make against the assets clients hold within their Sipps.
This will replace the current annual management fees Sipp clients are being charged and will enable them to eventually transfer out.
The administrators have issued the court application with a hearing date set for February 29 and March 1.
FT Adviser reported last month that this charge could amount to as much as £37mn. The administrators have said this would be to cover work arranging transfers out for the 16,741 Sipp schemes.
The administrators said it will be writing to all clients shortly to provide a calculation of each client's estimated EAC.
It said total estimated EAC constitutes approximately 2.8 per cent of the total assets under administration.
There was then a warning earlier this month that Hartley Pensions was expected to run out of money by the end of January, increasing the risk of liquidation.
In an update to clients, published January 18, UHY Hacker Young said it has sourced a loan facility to allow the company to continue to trade until such time as an EAC is able to be charged, from which the loan can be repaid.
It stated: "The company has insufficient funds to cover the cost of an orderly individual transfer out of client assets.
"In fact, the company will run out of money at the end of January 2024 and will either have to be dissolved or will move into liquidation, unless of course sufficient funds are raised to transfer client assets out to new operators.
