An FCA spokesperson added: “We’ve acted over many years to improve standards in Sipps. As soon as we found issues with Hartley, we moved to protect its customers.
“We remain engaged with the joint administrators to seek the best outcome for Hartley customers. We expect agreement by the end of this month on how those affected will receive FSCS protection. Hartley buying Sipps operated by others wasn’t subject to our approval.
"Acquiring books from other Sipp operators is a commercial decision for a firm to make. We do not encourage firms to adopt any particular commercial strategy but we do expect firms to keep us informed of any potential mergers, acquisitions and takeovers, and we will question firms about their interest in acquisitions and growth plans taking into account information available at the time."
In the event of a Sipp provider collapsing, an administrator is appointed to wind up the business. The book of Sipp clients will often be transferred to (or bought by) an alternative Sipp provider, whose role will then be to continue running the scheme with as minimal disruption to clients as possible.
But the Hartley story has been far from simple.
At the centre of this debacle are desperate clients, many of whom had already experienced the failure of a provider, and who have been unable to exit to another provider.
Robert Paterson, a partner and insolvency practitioner at Wedlake Bell, says: "The investor monies in the Sipp pensions don't technically form part of the company's assets. They're held on trust for the Sipp holders i.e. the beneficiaries of the pension funds."
Dentons' McPhillips says: “One can only begin to imagine their sense of frustration about the whole situation. Whether or not any of those clients will wish to have matters investigated further, will be for them to decide.”
UHY Hacker Young had been trying to sell the Sipp book to a single operator but was unable to find one company to take on the company's client book for a number of reasons, including:
- the poor quality of the company's records;
- management and employee capacity to onboard such a sizeable book;
- outdated IT infrastructure;
- reputational concerns surrounding the background to the company and why it entered administration;
- the cost of putting in place the requisite infrastructure to onboard the client book; and
- concerns around residual liabilities attaching to the operator from unauthorised payments.
Given that no single operator, or operators, are currently able to take on the entire or blocks of the client book, clients will be required to nominate their own preferred choice of operator to transfer their Sipp to.
They would then be transferred out on an individual basis to an operator of their choice – a much more costly exercise.
With Hartley now in default, the FSCS can pay compensation on clients' exit charges, but the company is not in default for individual claims.
