IFAs call for clampdown on investments for Sipps
Consumers are being lured into unsuitable investments within their Sipps and could risk losing significant amounts of money, IFAs have warned.
Neil Parker, director of Teesside-based Joslin Rhodes, said he knew of a client whose former IFA had put roughly £140,000 into a single unit trust fund within a Sipp wrapper.
He added that he was still trying to ascertain the full extent of the charges, estimated between 5 per cent to 7 per cent, plus the effect of any commission and investment performance on the fund.
Mr Parker said: “Generally I find that people who have a Sipp wrapper do not really need one. They may have been tempted by the fact that Sipps have certain tax benefits or told they can put a lot of different investments within it, such as commercial property, but when I see that investors have nearly all their money parked in just one fund inside a Sipp, it is simply unnecessary and costly.”
Carl Lamb, director of Norfolk-based Almary Green, said: “It is high time that pension trustees took more responsibility for the type of investments that are promoted to Sipp and small self-administered scheme investors.
“The recent reports on the mis-selling of allegedly fraudulent investments in bio-fuel companies, unregulated collective investment scheme structured products and life settlement policies are just the tip of the iceberg.
“There is a worrying number of esoteric investments which have been sold to Sipp investors which are starting to unravel, and yet no one is willing to accept responsibility for the detriment caused to investors.
“The buck should stop with the pension trustee as they have oversight of what goes into investors’ Sipps and Ssas. They should be acting as the goalkeeper, stopping them from being promoted to ordinary investors in the first place
“We have clients who have had a bad experience with some of these exotic investments, but trying to extricate them is extremely difficult as these investments are often highly illiquid, with few buyers.
“The FSA needs to come out with tighter regulations for Sipp investments. Otherwise all advisers will be tarnished with the same brush, which is unfair as we have always avoided the promotion of exotic or unauthorised investments to our clients.”
In April this year the Serious Fraud Office announced that 2000 investors may have lost £40m through investing in an insolvent bio-fuel investment company used by 12 to 15 Sipp providers. In March the FSA set out proposed guidelines on how Sipp operators should yield information to clients on charges and projections.