A total of 23 per cent of advisers want an outright ban on Sipp providers earning money from retained interest charges in projections and reduction in yield calculations - the ‘interest turn’ from Sipp cash accounts.
This number has almost doubled in the last six months, according to research by Momentum Pensions, which shows 23 per cent of advisers now want a ban on the practice, compared to 13 per cent when the same research was carried out six months ago.
Research conducted for Momentum Pensions by Pollright among 106 advisers from 6 to 9 June using an online methodology found 66 per cent of advisers feel interest turn should be disclosed in line with Financial Conduct Authority guidance.
According to Momentum, the transparency debate is becoming even more important as the Financial Conduct Authority’s capital adequacy requirements for Sipp providers come into force on 1 September this year.
These rules base solvency requirements on the proportion of standard and non-standard assets held by Sipp providers.
The FCA has proposed in one of its consultation papers that Sipp providers should be obliged to disclose retained interest charges in projections and reduction in yield calculations.
Momentum Pensions added an important aspect of this transparency is to ensure Sipp providers are meeting associated capital requirements charges themselves, and should not be expecting investors to pay extra levies to cover the costs.
Additionally, research by the firm showed that 77 per cent of advisers are looking for providers that have strong corporate governance systems in place, and 64 per cent want more clarity from the FCA or HM Revenue & Customs on non-standard assets, whilst 42 per cent want specific clarity on peer-to-peer investments.
Stewart Davies, chief executive of Momentum Pensions, said: “Advisers are scrutinising Sipp providers more than ever before ahead of the introduction of the capital adequacy rules next month, and there is simply no room for anything other than complete openness and transparency.
“Additionally, an important aspect of this transparency is for Sipp providers to meet associated costs of meeting these regulations themselves. It is completely wrong to pass on any associated charges to investors, and advisers have the right to be reassured that their clients won’t be expected to meet these costs at all.”
Colin Rodger, director at Glasgow and Edinburgh-based Alexander Sloan Financial Planning, said: “In the interest of transparency it is not the greatest idea and providers should not do it. They should adjust their fees accordingly. Fees should be open.
“It is all part and parcel of trust with clients. If something seems a little under the counter then it does not foster trust in financial services.”
ruth.gillbe@ft.com
