In July the regulator published a ‘dear CEO’ letter which stated the regulator remained concerned Sipp operators are still failing to manage risks and ensure customers are protected appropriately, despite recent guidance.
It also revealed the findings of its latest Sipp thematic review, which was launched in October. The regulator has been unhappy with operations in the sector for some years and this was its third full review since 2007, while it has also recently published new capital adequacy rules.
In the ‘dear CEO’ letter, the FCA said: “We are concerned that many firms in this sector continue to demonstrate a lack of engagement with some areas of their regulatory obligations, and hence pose a threat to the quality of outcomes experienced by consumers.
“I would encourage you to review the key findings from our thematic review... and ask you to take action to ensure that your business is able to demonstrate an appropriate degree of protection for consumers’ pension savings.”
However, several Sipp firms have complained to FTAdviser that there was little detail in the thematic review findings, which will therefore leave some issues open to interpretation.
The findings of the Sipp thematic review, revealed in an Annex in the ‘dear CEO’ letter, occupied two-and-a-half pages, and while it did state the regulator had assessed due diligence in five key areas it failed for example to list examples of good and bad practice.
In contrast, the FCA’s second thematic review into the Retail Distribution Review, published in April, ran to 14 pages. It detailed how many firms had taken part, key failings including the percentages of fims which had failed on particular issues, examples of good and bad practice and what its desired outcomes were.
Andy Leggett, who manages the Sipp business development team at Barnett Waddingham, told FTAdviser that if the industry is to properly learn lessons from the review, the regulator needs to be more transparent with its evidence.
“There is a clear need for greater transparency and accountability, if the FCA is going to tar all operators with the same brush as the most onerous in the market, then it should be more open about the thematic review’s wider findings.
“The FCA is on a long journey of discovery in the Sipp market, it still doesn’t quite know what it wants, but won’t admit it is fallible.
“It seems to be blind to the consumer detriment of unnecessary capital adequacy and the costs it piles on Sipp administrators that is eventually passed on to clients.”
Claire Trott, head of technical support at Talbot and Muir, agreed more guidance on standards and processes from the FCA would be welcome.
“It has long been the practice for the FSA/FCA to only give an opinion after the fact, which means that providers will be given different guidance because then will have interpreted rules differently in the first place and therefore they are likely to be advised in a different manner.”
Greg Kingston, head of marketing and proposition at Suffolk Life, told FTAdviser that caution needs to be exercised when providing evidence of the ‘serious failings’.
“Clearly there’s a commercial aspect here: if the failings are serious but recoverable in the FCA’s view then ‘naming and shaming’ may damage the success of that recovery. The regulator may also be concerned that, by providing additional evidence of failings, they inadvertently create a set of standards that are only marginally better.
“On the other hand, more openness could lead to a greater level of consistency in how providers are handled and that would certainly be welcome.”
peter.walker@ft.com
Additional reporting by Donia O’Loughlin.
