PensionsFeb 13 2014

‘Sipp transfer cost hikes in breach of TCF’

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Some self-invested personal pension providers could be in breach of the FCA’s treating customers fairly rules by increasing the cost of transferring between schemes, Greg Kingston has claimed.

The head of marketing and proposition for Sipp provider Suffolk Life, said the trend was especially prevalent with commercial property schemes.

He claimed that increases in transfer-out fees and other ancillary costs – such as asset disposal fees, valuation fees and conveyancing costs – were “running into thousands of pounds”.

Mr Kingston said: “Investors and advisers are often hard-pressed to calculate the cost to leave when applying for a new plan, and with commercial property transfers the trend is bordering on protectionist pricing, with the intent to deliberately restrict investors from moving to a new Sipp provider.

“We’ve seen evidence of one provider insisting on property valuations being made as a requirement to transfer out, even though there’s no legislative requirement in place.”

He added that the industry must question whether TCF outcomes risk being breached, adding: “In general, it should be no more costly to transfer out of a Sipp than to set one up.

“However, I suspect that complaint levels are currently low, with many investors resigned to staying with their current provider when faced with, ‘it’s in our terms and conditions’.”

Ray Chinn, head of pensions and investments for LV=, said: “I wouldn’t agree that providers are deliberately seeking to stop people transferring out. Most would say that the charges are in their fee schedule, however the problem is that the customer is often not aware of the costs until the transfer takes place.”

Mr Chinn said what was more concerning was if a Sipp provider were to leave the market due to increased capital adequacy costs.

He added: “The customer should then be protected from additional charges as they have no choice but to transfer out.”

David Penny, managing director of Somerset-based Invest Southwest, said: “I’m personally not aware in any change of costs for these types of Sipp transfers, but there are many examples in financial services of terms being changed. Regarding complaint levels, it really would depend on the size of those costs.”