SIPP  

Trouble ahead as Sipps swerve FCA savings rate rule

"Unlike bank accounts, pensions are not designed to act as a long term home for cash savings.

"This was raised in the FCA's Retirement Outcomes Review and the regulator is already looking at remedies appropriate for the Sipp market, including potentially requiring savers to make an active decision to invest in cash."

The regulator’s report revealed that around 50,000 (33 per cent) non-advised consumers are wholly holding cash, with more than half at risk of losing out on significant returns as a result.

Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, classifies the Sipp cash holdings as similar to a current account, rather than a savings account, since they "are used to cover platform/adviser fees, make new investments, pay income/dividends out, etc".

Mr Chan argued that Sipps don't "price discriminate" on interest at all with regards to new versus old client like the banks appears to do, which is the focus of concern for the FCA.

He said: "[Sipp providers] either do or don't pay interest on cash.

"Some of the better platforms, such as Transact, will still pay interest on the cash held in cash accounts (by pooling together all cash held across the platform and then depositing across several institutions for interest) and some of the less ethical ones simply retain the interest earned rather than reimbursing the client."

maria.espadinha@ft.com