A permitted investment list for self-invested pensions, small self-administered schemes and qualifying overseas pension schemes would prompt a fall in complaints and a corresponding drop in adviser levies to the Financial Services Compensation Scheme, London and Colonial has said.
Adam Wrench, head of business and product development at L&C, previously told FTAdviser that the Sipp provider would like to see a permitted investment list in place. Mr Wrench said the provider has now put together a blueprint of what such a list would look like.
A permitted investment list, authorised by The Pensions Regulator, would attempt to clear up grey areas surrounding the wide range of investments available and place more emphasis upon those investments pension savers can invest in.
Mr Wrench added there was a “huge grey area” when it comes to pension investments that are open to legal interpretation and this must be avoided at all costs.
Yesterday (21 January), the Financial Services Compensation Scheme’s plan and budget 2014/2015 revealed that life and pension advisers are going to see their levies increase by 32 per cent owing to Sipp complaints.
Speaking to FTAdviser, Mr Wrench said: “This list will reverse this trend and reduce complaints. Complaints are always about non-mainstream products. If non-mainstream products are not on the list, investments into Sipps/Ssas and Qrops cannot be made.
“If HMRC implements a permitted investment list, and someone goes away from the list, it is an unauthorised payment so then a huge tax charge would be charged, so they are incentivised to not go away from the list.
“Sipps should not be used by all and sundry - that’s not what they’re for. If we go back to small and medium-sized business owners who have a trade or own business premises they can use the pension scheme to help invest in their own business.”
Mr Wrench added there are three asset classes non-mainstream assets fall under including unquoted shares, third party loans and property.
He said: “They need to be clearly defined. Unquoted shares should not be allowed at all. Third-party loans should be allowed if clear rules about how that loan can be structured in the same was as Ssas connected loans. Property can be allowed if it’s based in the UK and in a trading premises and the property must be used by a company for its trade.”
London & Colonial’s permitted investment list includes:
• securities listed on a UK or HMRC recognised stock exchange;
• discretionary managed investment portfolio regulated within the EEA;
• an investment platform/wrap regulated within the EEA;
• authorised investment funds including unit trusts and open-ended investment companies;
• investment trusts and real estate investment trusts;
• exchange traded funds;
• insurance company managed funds;
• trustee investment plans;
• structured deposits and products;
• fully developed UK commercial real estate (trading premises only); and
• unconnected secure loans and cash.
Mr Wrench added: “We are not banning people from making investments but do it outside of your pension. However, they won’t because this is the way they view pensions... they view pensions to be a write-off.”
