Calls for FCA action on hidden Sipp charges

Calls for FCA action on hidden Sipp charges

Advisers are backing regulatory action to force self-invested personal pension providers to publish their charges, after more than one in three said their clients have experienced unexpected fees.

A poll commissioned by Momentum Pensions of 101 advisers in January, found 34 per cent said their clients have been hit in the past by charges which they had not anticipated.

Nearly half of those (47 per cent) questioned say they found it difficult to compare charging structures among Sipp providers when making recommendations to clients.

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Concerns about charging and being able to compare effectively are uniting advisers in support for regulatory action, with 94 per cent stating they would back the Financial Conduct Authority in making all Sipp providers to publish charging structures in a standard format.

Stewart Davies, Momentum’s group chief executive, said Sipp contributions are growing strongly, but the support of advisers is crucial to maintain momentum across the market.

“It is clear that advisers want total transparency over charges from providers, so they can make meaningful comparisons and recommendations to client, so it is shocking that so many say they have been caught out by unexpected fees.

“Sipp providers need to respond as the market relies on adviser support to ensure the full potential of pension freedoms is achieved.”

The research also suggested advisers rate transparency of charges as the most important characteristic of providers - backed by 90 per cent of those surveyed - narrowly ahead of the 86 per cent who chose ease of using administrative systems.

Claire Trott, director and head of pensions technical at Talbot and Muir, said she agrees that some Sipps have too many time cost charges for things they deem non standard.

“A bespoke Sipp provider like ourselves has a comprehensive fee schedule that details all the fees chargeable to the adviser’s clients and when they are due to be paid (advance or arrears). This should mean that it should be easy to establish what is chargeable in any instance.

“That said, it would be a lot simpler for advisers to compare costs of Sipps if there were simplified illustrations allowed using standard growth rates rather than growth rates determined by the portfolio.”

Xafinity’s head of Sipp and Ssas business development Jeff Steedman said that these products are by their very nature pretty complex, especially those with commercial property in the mix.

“XafinitySipp spends a lot of time and energy looking to present fees with absolute transparency and in line with Amps guidance, and I think we’re pretty good, but our fee card still runs to four pages.

“We have seen some that run to 19 pages, so it’s no wonder clients can be hit with a surprise or two. Also we have seen one or two providers re-structuring fees, and adding a number of new ones, which are sure to catch clients out.”