SIPP market could be hit by rebate ban
SIPPs come under spotlight following FSA paper, with lower end of market expected to be hit.
The FSA’s ban on cash rebates could impact on the SIPP market, with some providers no longer finding it viable to run the pension schemes.
Released today, the regulator’s consultation paper on platforms bans cash rebates from fund managers to platforms, but hints that it could be extended beyond the platform space.
The paper adds, “The FSA is also seeking views on whether the ban on payments from product providers should be read across to the wider retail investment market, such as to life companies and self-invested personal pension (SIPP) operators.”
Martin Tilley, director of technical services at Dentons, said that both the lower and mid-range SIPP markets will be affected by the new rules.
He added that the platform or simple SIPPs, which tend to invest only in collective investments, will be hit the hardest.
That said, he endorsed the move, saying that it is good for consumers to have more transparent pricing.
Cofunds backed a broadening of proposals, saying, “We’re keen to see the FSA apply the same rules across the whole market, picking up the SIPP and life companies, as we see no reason why the end investors won’t value transparency in this area too.”
Greg Kingston, head of marketing at SIPP provider Suffolk Life, said that the outcome could lead customers in so-called ‘free SIPPs’ unwilling to pay an explicit charge.
Currently platform SIPPs that are largely invested in collective investment schemes use fund manager rebates to pay for the product, offering it to clients for no upfront fee.
“While transparency is a good thing, if it changes the way that some people save is it the right outcome?” Kingston questioned.
However, he believes that much of the SIPP comment is noise from platforms trying to divert attention and at this stage the FSA is only seeking views on broadening the restrictions.
He added that some platform providers are effectively just SIPP providers, saying, “Is this the FSA taking the opportunity to have a look at it, to avoid some platform providers classifying themselves as SIPP providers?”