Pensions  

City Trustees vetoes permitted investment list

Self-invested personal pension provider City Trustees, part of Mattioli Woods, has disagreed with calls for a permitted investment list, believing additional and ongoing due diligence is required for non-standard assets.

When asked for views on permitted investment lists, the firm said it currently has thorough due diligence procedures in place to review any non-standard assets prior to their inclusion within a pension scheme, and that it carries out ongoing reviews of such assets.

Ed Carey, managing director of City Trustees, said: “With the FCA’s capital adequacy review, many Sipp providers are refusing to consider accepting non-standard investments in a pension scheme.

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“This flies in the face of one of the key attractions of a Sipp; its ability to hold a wide range of investments.

“As a provider, we have a very open attitude to investments that are presented to us by our IFA partners. However, as co-trustee we have a duty of care and a responsibility to our members to ensure any investments fully meet HMRC guidelines.

He added: “For this reason, we need to check the adviser has assessed the suitability of a non-standard asset within the Sipp, as well as completing our own due diligence”.

City Trustees’ view come in stark contrast to London and Colonial, which said earlier this year that a permitted investment list could prompt a fall in complaints and a corresponding drop in adviser levies to the Financial Services Compensation Scheme.

Similarly, a number of providers of self-invested pensions and small self-administered pensions said that they 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 in 2013.

The recent thematic review by the Financial Conduct Authority highlighted a number of issues concerning non-standard investments, including insufficient capital to absorb unexpected liabilities, a lack of evidence of adequate due diligence being undertaken for investments, and poor monitoring.

The regulator considered whether certain operators should refuse unregulated collective investment schemes as part of the review, alongside unlisted shares and commercial property syndicates.

Commercial property that cannot be readily realised within 30 days will also be deemed as non-standard.

Recently, the FCA issued a warning letter to all Sipp operators stating that a significant number were failing to comply with capital requirements, or undertaking inadequate due diligence in relation to non-standard investments.

Mark Smith, head of compliance at the regulator, said it was primarily about suitability.

He said: “There is still a place for non-standard investments, but it has to be the right type of business and the right type of client. It is also about systems and controls, and Sipp providers need to be able to demonstrate to the regulator the safeguards they have in place.”

ruth.gillbe@ft.com