PensionsAug 18 2016

Small Sipp providers to continue going bust

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Small Sipp providers to continue going bust

Falling into administration is a looming threat for an increasing number of self-invested personal pension (Sipp) providers, industry experts have predicted.

The grim forecast followed news in July that Brooklands Pensions had formally entered administration and was subsequently bought out by Heritage Pensions.

In June, Sipp provider European Pensions Management had met the same fate. The business was subsequently snapped up by Curtis Banks.

John Moret, founder of consultancy MoretoSipps, said the recent sale of European Pensions Management was a further indication of the impact of the regulator’s targeting of smaller providers.

He added: “There are still too many smaller Sipp providers allowing bespoke investments at a time when revenues are falling – notably bank interest – and costs are escalating, largely as a result of the regulatory overhead.

There are still too many smaller Sipp providers allowing bespoke investments at a time when revenues are falling – notably bank interest – and costs are escalating.

“I expect to see more sales and would not be surprised if one or two other smaller providers followed European Pensions Management into administration.”

Mr Moret said much of the collateral damage caused to investors could have been avoided had the regulator got to grips with the Sipp market sooner.

Phil Young, managing director at support services Threesixty Services, called on the Financial Conduct Authority to enforce greater transparency on Sipp providers.

He said even where they met the new capital adequacy requirements – which come into force at the beginning of September and set the fixed minimum capital required for Sipp firms at £20,000 – providers might not be able to meet the additional burden of a negative regulatory review and the consequent work and costs.

Robert Lewis, director at Flintshire-based Heritage Financial Solutions, said some smaller Sipp providers had charges that could not be justified.

Liz Coyle, compliance policy manager at SimplyBiz Group, said Sipps were facing a reputational challenge, with Financial Ombudsman Service figures showing the number of complaints received about Sipps in the year to the end of March was up 14 per cent on the previous 12 months.