Sipp survey: providers still awaiting clarity

Sipp survey: providers still awaiting clarity

The speed of change in the self-invested personal pension (Sipp) market means its status as the sole recipient of two Money Management surveys a year has rarely been called into question. But in one particular area, the sector has slipped into an unexpected stasis.

The growth of the Sipp market has been frantic, particularly in the aftermath of the RDR and the 2015 pension reforms. But their growing popularity with consumers has not been without problems.

Sipps’ status as the go-to retirement vehicle has also attracted scammers, who have exploited the products’ sometimes dangerous combination of flexibility and complexity to hoodwink savers into investing in unregulated and unscrupulous schemes.

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Clamping down

The FCA has reiterated its tough stance on such practices, but the short-term shape of the Sipp market may hinge on civil court outcomes, rather than regulatory intervention. Our previous survey, in April, stated as much, and there has been a surprising lack of movement since then.

Two providers – Carey and Berkeley Burke – are locked in legal disputes, with the roles of unregulated introducers and high-risk assets at the heart of both proceedings. The former case involves one complainant, Russell Adams, whereas 77 people have raised a group mis-selling claim against Berkeley Burke.

Meanwhile, a judicial hearing into whether the Financial Ombudsman Service (Fos) was right to rule against Berkeley Burke in 2014 for failing to carry out adequate due diligence on unregulated investments is due to take place on 10 October. This case will also have significance for the market, given the Fos has appeared reticent to take a firm stance on Sipps prior to the hearing. But commentators say delays to the civil cases are also emphasising how tricky such decisions may prove.

Martin Tilley, director of technical services at Dentons, says a delay in announcing the Carey judgment poses a problem for the whole industry. “The fact that judgment is outstanding over five months after the case closed would indicate the issues at hand are multiple and complex. It would appear to be far from the ‘cut and dry’ scenarios some commentators have stated.

“There are also separate issues to consider: the acceptance and need for due diligence on assets of Sipp providers introduced from financial advisers, and the acceptance, or otherwise, of assets from unregulated introducers who may have had an interest in that investment.”

For Carey, it appears even a favourable outcome would not be enough to save it. In May, the Sipp administrator put itself up for sale after reporting losses of £153,784 and £215,226 in 2016 and 2017, respectively.

Nigel Bennett, sales and marketing director at InvestAcc, says: “We hope that once these cases have been concluded we will have more clarity over who is responsible when investments go wrong, although realistically this may only provide part of the picture as the facts of the cases and the judgments made are unlikely to fit every scenario.”

No introductions needed

The role of unregulated introducers has cast a cloud over the Sipp industry since the introduction of pension freedoms. While many scammers have sought to use small self-administered schemes to entrap victims, Sipps have also played a part. Recent data shows the number of complaints about Sipps has almost doubled, and the proportion of these complaints upheld is higher than for any other product.