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An FSA spokesman said that this was a post-implementation review following the start of Sipp regulation in 2007.

The Sipp providers are being asked to fill in a questionnaire and send copies of all relevant documentation to the FSA.

The spokesman said it was the smaller firms whose activities were being reviewed because they did not have direct relationship managers who keep in regular touch with the FSA.

Feedback on the review will be made available to the industry in the third quarter of this year.

Nigel Speirs, chief executive of Wales-based IFA Buckles Investment Services, said: “This makes you very cautious in terms of recommending Sipps, because the FSA seems to be suggesting they are sold for the wrong reasons.”

Mr Speirs said: “The main thing I would welcome is an acceptance and understanding by the FSA of the different types of Sipps out there, because they are so vastly different from insured Sipps, which have heavy charges.”

But Robert Graves, head of technical services of Rowanmoor Pensions and chairman of the Association of Member-Directed Pension Schemes, said: “There is nothing surprising about what is going on. It is about the FSA doing its job in terms of getting an understanding of firms under its remit.”

Mr Graves said: “The fact it is going to issue something later this year suggests they have not discovered anything untoward.”