Statistics from the Fos, published in August, show the number of new cases rose to 922 between April and June this year, up from 521 over the same period in 2017. More than a third (35 per cent) of the decisions went in favour of the consumer, placing further scrutiny on whether Sipps are being sold and administered appropriately.
Some may argue that a hike in the number of complaints is part and parcel of a booming market. But whatever the outcome of the pending court cases, some in the market believe providers must take it upon themselves to strengthen processes.
Morgan Lloyd technical director John Dowding says: “Unless there is some intervention from the authorities, be that the FCA or HMRC, then [unregulated] investment opportunities will continue to be promoted.
“It is therefore increasingly important that Sipp providers significantly enhance their due diligence requirements to ensure that spurious and unsuitable investments are rejected at the earliest opportunity.”
The Fos, however, has faced scrutiny of its own. An expose by Channel 4’s Dispatches programme has led to the organisation planning to overhaul a number of its current practices. Greg Kingston, group communications director at Curtis Banks, suggests this is something that will benefit providers.
“The Sipp brand will continue to be tarnished by what are, in reality, investment claims. From a provider perspective, it would be encouraging to see the consistency and quality of decision making at the Fos improve. It is important for everyone – providers, advisers and consumers – to have confidence in the ombudsman’s services.”
Our survey indicates that business remains relatively buoyant in the face of these challenges, though growth rates have now slowed slightly.
Table 3 highlights firms’ business levels over the past 12 months. Given that only a minority of individuals set up a Sipp with new money, the bulk of business comes from transfers, with London & Colonial and Morgan Lloyd witnessing 100 per cent of new money arriving on this basis.
The surge in volumes from defined benefit (DB) schemes also continues to play its part, despite Money Management reporting earlier this year that the upward trajectory of transfer volumes has begun to reverse.
Mr Kingston explains: “Sipps continue to be the main beneficiary of pension transfers, keeping pensions invested for longer. That transfer business has slowed as the heat has gone out of DB transfer volumes. I think there must be some future concerns around providers who accepted DB transfers without advice.”