Advisers have been using self invested personal pensions as a sales tool to consolidate investments without any real objective, an IFA said, as he joined calls for the industry to adopt a ‘permitted investment list’.
Speaking at a roundtable discussion at Barnett Waddingham, Minesh Patel, financial adviser at EA Financial Solutions said the Sipp market “has been too loosely regulated in my opinion”.
He said that allowing a ‘permitted investment list’ would be cogent to go in a direction where people know what is suitable and what is not.
Last October, FTAdviser reported that Sipp providers of self-invested pensions and small self-administered pensions would like to see a return of the pre-2006 ‘permitted investment list’ that specified which investments could be placed into a member-directed pension.
This follows recent Sipp scandals and the FCA warnings about unregulated investments.
In April the FCA issued an alert to advisers, signalling its toughest stance yet on recommendations to clients to transfer their pensions into self-invested alternatives weighted to “non-mainstream investments”.
Both AJ Bell and London and Colonial are supportive of a move back to some form of a permitted investment list.
Today, Mr Patel said: “One of the areas that has been suggested has been investments which are allowed and not allowed on a permitted list, I think that would be cogent to go in a direction where people know what is suitable and what isn’t.
“Ultimately IFAs need to be guided to what is suitable and what isn’t rather than using it as a sales tool to recommend pensions, that’s how often Sipps have been used, to consolidate everything into a Sipp without any real objective.
“The Sipp isn’t suitable for all and I think the regulations need to go further in looking at that and being more specific. We should have a list of what is missing and what is key and why to stop abuse.”
However, Andrew Summers, head of fund research at Investec, does not believe a permitted investment list would work in reality.
He said: “Clearly in an ideal world you would have a complete list of what is allowed and what isn’t allowed but the problem is with financial services and financial investments there is a lot of grey, and almost as soon as the list gets issued it will be out of date.
“There will be investments which fall on the wrong side in retrospect either way and there will be a huge amount of debate about whether something is in or out and who is responsible for it.
“I agree it would be nice to have but I’m actually not sure if in practice if they do go down that route whether it will be much of a help.”
