SIPP providers reveal scale of Keydata cash black hole

SIPPs have lost 'millions of pounds' as a result of the collapse of Keydata, providers say, as the scale of the deficits slowly come to light.

Investors are now starting to be compensated and some of the money returned to their fund, but only up to the £48,000 FSCS compensation limit.

Any shortfall not covered by the scheme is lost from the SIPP, leaving many with a black hole in their funding.

Providers say potentially tens of thousands of pounds will have been wiped off investors’ individual retirement pots, which could prove impossible to plug for savers nearing their retirement date.

Jonathan Lochery, director of IPM SIPP Administration, says: “Some of our clients had £150,000 in a single investment in Keydata.

“We had 44 people invested in Keydata via our SIPP, with each investment being worth between £50k and £150k. We are talking millions of pounds here.”

Martin Tilley, business development director at Dentons, says Keydata exposure through SIPPs has been widespread. This will mean many providers will have seen AUM in their products drastically depleted.

“We are fortunate in that our IFAs tend to focus more on alternatives like commercial property, but some have put clients into structured products so we have a few cases,” he says.

John Moret, director of MoreToSIPPs, adds: “There was some investment in traded life settlements via SIPPs. I would say it was a small percentage of total scheme assets, but that is not an insignificant amount of money.”

The FSA put Keydata into administration in June 2009 after it emerged hundreds of its ISA products may have been “illegal”, triggering a multi-million pound tax liability the FSA said the firm could not pay.

However, two years before the action, the FSA outlined a catalogue of failings in IFA firms’ marketing and distribution of the Secure Income Bond (SIB) and Secure Income Plan (SIP) products.

It followed a low-key thematic review into the advice processes of some firms known to be recommending the Keydata SIB or SIP vehicles.