Several self-invested personal pension specialists have made fresh calls for the FCA to better define what makes a Sipp, saying the current confusion prevents like-for-like comparions.
At present, the regulator’s glossary goes no further than naming a Sipp as a self invested personal pension, without explaining the limitations or expectations from providers offering Sipps.
Although HM Revenue & Customs does define Sipps on their website, when FTAdviser asked about this, a spokesperson said: “Sipps are not something we define in tax legislation, but a type of personal pension that allows for the individual to make investment choices.”
Murray Smith, sales and marketing director at Mattioli Woods, said this lack of clarity has “led to real consumer confusion, as it is difficult to compare one Sipp with another on an ‘apples for apples’ basis”.
Martin Tilley, director of technical services at Dentons Pensions, said the definition of Sipps has always been too broad.
He said the problem is there are simple platform Sipps, which are just multi-fund personal pensions, alongside full Sipps, that allow property and other non-standard assets.
“There are also some vehicles that blur the lines in between and/or do both so no satisfactory definition has ever been offered,” commented Mr Tilley. “This can cause confusion with the less informed when trying to compare products in the marketplace.”
Mr Smith said his firm has long been calling for better definition around what a Sipp really is.
“The bottom line is that the phrase Sipp has been used to sell an array of pension products, simply on the basis that the concept of a Sipp was the ‘flavour of the month’.
“For example, a personal pension that has links to discretionary fund management is not, in my view, a Sipp, nor is a personal pension that offers links to other external funds on an advisory basis.
“These are simply personal pensions that carry an element of investment sophistication.”
Mr Smith added in the case of Mattioli Woods, the business has created a personal pension that offers links to discretionary fund management, but not called a Sipp, on the basis that it is far removed from the original intention behind Sipps.
“Accordingly, having greater definition around what a Sipp is would certainly aid advisers and clients to make more informed and better decisions based on like-for-like comparisons.”
“The Sipp market is in real disarray and facing a dramatic period of change with the onslaught of new capital adequacy requirements,” said Mr Smith. “Therefore, more detailed questioning around Sipp providers’ financial strengths, strategic outlook and plans, as well as their history is critical.”
The FCA declined to comment.