SIPPSep 22 2020

Moret says ring-fence historic Sipp claims to reduce levy

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Moret says ring-fence historic Sipp claims to reduce levy

The industry has reached a point where historic self-invested personal pension claims should be left in the past in a move to drive down the Financial Services Compensation Scheme Levy for advisers, John Moret has claimed.

Speaking to FTAdviser about the state of the Sipp market after an impressive 50 years in the industry, Mr Moret said it was about time the industry moved forward and stopped dealing with claims from more than eight years ago.

Mr Moret said: “I can understand why advisers get so upset at having to bail out individuals and organisations that accepted business from either unscrupulous advisers or certainly unregulated advisers. 

“That is not to say I necessarily believe that providers were totally responsible, I believe there is a shared responsibility to be quite honest. 

“But the sooner we can reach a point where those historic claims are effectively ring fenced the better it will be and would have benefits in terms of funding the FSCS going forward.”

Otherwise known as “Mr Sipp” due to his advocacy for the pension products, Mr Moret said his latest ambition was to “sort the Sipp market out once and for all” and claimed that there were two issues currently affecting the industry.

One is a legacy issue which, Mr Moret argued, could be fixed by leaving problems in the past and moving forward.

He said: “It would be really helpful if the regulator accepted that there was a period between 2007 and 2012 when providers were not entirely clear what their responsibilities were, particularly in terms of investment due diligence. 

“The FCA could then say that for any investments made during this period, providers would just need to show that they actually operated in line with their understanding at the time. And if we could just put those legacy issues to bed, it would help enormously.”

He added: “The reality is that most of these claims have now reached the courts or the Financial Ombudsman Service or the FSCS where providers have gone into administration. 

“I don't think there are many more, or indeed any more, to come through in terms of investment and providers getting into trouble on the back of them. 

“There are obviously a lot of claims still pending, most of which look like they will end up with the FSCS."

In July 2014 the FCA published a Dear CEO letter to all Sipp providers warning of failings on due diligence on non-standard investments, but before then providers were still unaware as to what their responsibilities were.

"I just think if we could find a way of drawing a line in the sand on those historic issues, it would make a big difference and 2012, around the time of the second thematic review, is the logical place because beyond this most providers were very clear of their responsibilities," Mr Moret said.

Last year, there was a missed opportunity to provide certainty for the Sipp industry and set a precedent for the debate surrounding Sipp provider responsibility when accepting assets, after Berkeley Burke Sipp dropped its appeal against a Financial Ombudsman Service decision from 2014.

However, the recent High Court judgment from the Carey Pensions trial ruled the provider, which was explicitly acting on an execution-only basis, was not liable for a member’s choice to invest in a high-risk investment.

Many in the Sipp industry were awaiting this judgment with bated breath as it was expected to put many issues to bed and potentially create a precedent going forward.

But Mr Moret flagged that aside from the FCA's brief comment after the case, which was effectively that things haven’t changed and we need to carry on, the industry has not had any other updates and does not know whether an appeal with go ahead. 

Redefining Sipps

According to Mr Moret, the other step that needs to be taken is for the FCA to define or redefine what is actually meant by Sipp, as this has changed over time.

Nowadays, the FCA and others use the terms streamlined Sipps and complex Sipps, he explained.

Mr Moret said the industry should adopt an approach whereby a streamlined Sipp only holds standard investments and a complex Sipp allows investments in non-standard assets.

He said: “This seems a reasonable way of moving forward, but I would also propose that only individuals that are high net worth or sophisticated investors are able to have a complex Sipp. 

Mr Moret added: “If we basically moved to a situation where only those two types of investors were able to invest in the wider range of complex Sipps, we would have something in terms of a regime going forward which is pretty clear and reduces the risks of further scams quite significantly. 

“I can’t understand why it has taken so long for this sort of approach to be adopted. I am not alone in having put ideas to the FCA along these lines nine months ago and nothing has been done.”

amy.austin@ft.com

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