Falling into administration is a looming threat for an increasing number of self-invested personal pension providers, industry experts have predicted.
The grim forecast followed news in July that Brooklands Pensions had formally entered administration and was subsequently bought out by Heritage Pensions.
In June Sipp provider European Pensions Management had met the same fate. The business was subsequently snapped up by Curtis Banks.
John Moret, founder of consultancy MoretoSipps, said the recent sale of European Pensions Management was a further indication of the impact the regulator’s targeting of smaller providers.
“There are still too many smaller Sipp providers allowing bespoke investments at a time when revenues are falling – notably bank interest – and costs are escalating – largely as a result of the regulatory overhead,” he said.
There are still too many smaller Sipp providers allowing bespoke investments at a time when revenues are falling – notably bank interest – and costs are escalating.“I expect to see more sales and would not be surprised if one or two other smaller providers followed European Pensions Management into administration.
“Whether the acquirers of these businesses can actually make money on their investments – however small – remains to be seen. There are few examples to date of any Sipp operator that has successfully and profitably handled the take-on of Sipp books.”
Mr Moret said he found these latest developments “disappointing and rather distasteful”, adding that much of the collateral damage caused to investors – and to advisers through “ill-conceived compensation schemes” – could have been avoided had the regulator got to grips with the Sipp market sooner.
Phil Young, managing director at support services Threesixty Services, called on the Financial Conduct Authority to force Sipp providers to issue full and complete accounts to provide greater transparency.
He said even where they meet the new capital adequacy requirements – which come into force at the beginning of September and set the fixed minimum capital required for Sipp firms at £20,000 – providers may not be able to meet the additional burden of a negative regulatory review and the consequent work and costs.
“I expect the Sipp market to shrink over time, as it becomes a much tougher environment in terms of operating costs, regulation and flight to bigger brands,” Mr Young said.
Robert Lewis, director at Flintshire-based Heritage Financial Solutions, said some smaller Sipp providers seem to have charges that can’t be justified.
“With pension charges getting more and more competitive, I can’t see how smaller providers can make it work without the volume larger providers have.”
Liz Coyle, compliance policy manager at SimplyBiz Group, said Sipps face a reputational challenge, with Financial Ombudsman Service figures showing the number of complaints received about Sipps in the year to the end of March was up 14 per cent on the previous 12 months.
“Of course, we have a more litigious culture than at any point previously, however, the fact that Fos have upheld 66 per cent of Sipp claims suggests that there is a genuine, growing problem,” she said.
ruth.gillbe@ft.com
