Sipp providers up fees to deal with non-standard assets

Sipp providers up fees to deal with non-standard assets

Advisers believe personal pension providers have increased the fees charged on non-standard assets or refused to accept them entirely following the introduction of tighter capital adequacy rules.

Research from Momentum Pensions demonstrated shifts in views on non-standard assets after tougher capital adequacy requirements were levied on self-invested personal pensions (Sipps) from September last year.

More than three quarters of advisers believe the rules on capital adequacy have led to higher administration costs on non-standard assets, while more than half believed that providers have declined to accept these assets completely.

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Non-standard assets such as unregulated funds, unlisted bonds and other special purposes vehicles are often at higher risk of failing, so Sipp providers have to hold higher amounts of capital to counter this risk.

John McCreadie, head of UK sales at Momentum Pensions, said there is still a long way to go before advisers are confident in the industry’s collective fee structure.

“Advisers and their clients need complete peace of mind that their investments are going into a retirement pot and are not being whittled away by unclear charges."

Advisers who participated in Momentum’s research, which surveyed 107 advisers across the UK during January, did believe that the capital adequacy reforms had improved due diligence by Sipp providers and that the new rules had accelerated a “flight to quality” by advisers to clients.

“The Sipp market has benefited from the introduction of the Capital Adequacy rules with significant improvements on key issues,” Mr McCreadie said.

Alistair Cunningham, financial planning director at Wingate Financial Planning, said the Sipp providers he has come into contact with have been “very transparent”, but added some smaller firms have taken on unsuitable investments.

“I think there's a greater awareness of capital adequacy matters, firms have generally improved balance sheets, but there's still smaller firms taking on trash investments.”