When the team queried this with the fund manager, the land was discovered to be near Chernobyl. “Don’t worry”, the manager told the team at Dentons. “At the time [of the explosion in 1986] the wind was blowing in the other direction.” Needless to say the investment proposition was not included in Dentons’ Sipp offerings.
Ms Turtle warns: “If a Sipp provider is not asking to undertake due diligence, then the adviser should be very concerned about how the business is being run.”
However even though Sipp providers are required to undertake more due diligence, this does not absolve the adviser of responsibility: you are still responsible for the advice and for the recommendation to invest, regardless of the duties imposed on Sipp providers.
“Diligence should be the watchwords”, George Houston, senior technical and development manager for Mattioli Woods, says. “Pensions investment rules are pretty wide in their scope but that does not mean all investments are suitable.
“This is a wider conversation advisers will have with clients as part of the ongoing advice process.”
Restriction of assets
“There may be restrictions on what can be invested in now”, says Ms Turtle, “which may restrict what previously would have been accepted. This could cause concern and additional work for advisers with their clients.”
Yet as Neil MacGillivray, head of technical support for James Hay, says: “Advisers must ensure any investments meet the plan holder’s risk profile and needs. The fact it may be non-standard should not be the issue but rather what is right for the planholder.”
Standard assets
Standard assets, as defined by the FCA in the personal pension scheme operators (PPSO) (capital requirements) section of the handbook, are:
- Cash
- Cash funds
- Deposits
- Exchange traded commodities
- Government & local authority bonds and other fixed interest stocks
- Investment notes (structured products)
- Shares in investment trusts
- Managed pension funds
- National Savings and Investment products
- Permanent interest-bearing shares
- Physical gold bullion
- Real estate investment trusts
- Securities admitted to trading on a regulated venue UK commercial property
- UK commercial property
- Units in regulated collective investment schemes.
As an aside, respondents to this guide have raised questions as to whether UK commercial property funds could be at risk of re-categorisation as non-standard assets.
This was a view highlighted in the weeks directly after the Brexit vote, when many UK commercial property fund managers gated their funds to prevent investors redeeming their assets.
According to the 2014 version of the PPSO, Sipp and other personal pension operators were required to consider illiquid UK commercial property as non-standard.
However, in 2015, this was changed to remove the reference to UK commercial property. The latest PPSO had those references struck through. This now reads:
So, what is classed as a non-standard asset?
