Pensions  

Sipp charges shock six out of 10 advisers

Sipp charges shock six out of 10 advisers

The majority of specialist retirement advisers have been caught out by unexpected charges from self-invested personal pension providers, according to research from Momentum.

The Sipp provider’s study found around six out of 10 pension advisers said their clients have been hit by surprise charges in the past year.

As a result, there are now calls for more transparency on costs from Sipp providers.

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Momentum’s research found 79 per cent of advisers would support moves by the Financial Conduct Authority to ensure providers publish their charges in a consistent manner to enable cost comparisons.

Around two out of five advisers polled said the capital adequacy rules introduced in September last year have increased charges for standard assets.

Around three quarters said they have pushed up charges for non-standard assets. 

The capital adequacy rules require firms, depending on their assets under administration to hold either 10, 15 or 25 times the square root of the value of assets.

So, for example, a firm with £100m of assets will hold 10 times £10,000, giving a total initial capital requirement of £100,000.

Momentum research also found pension transfer business – and particularly defined benefit transfers – are driving Sipp business.

Hundreds of thousands of savers have cashed in £9.2bn from their retirements pots since pension freedoms were introduced in April 2015, according to the latest government figures (from January).

The new rules give defined contribution pension holders access to their whole pot in one go – but those with defined benefit schemes have to transfer out of them before they can enjoy the same access, which has led to a huge rise in the amount of transfer business being carried out.

John McCreadie, head of sales (UK) at Momentum Pensions, said: “It is clear that advisers want total transparency over charges from providers so they can make meaningful comparisons and recommendations to clients and it is depressing that so many say they have been caught out by unexpected fees.

"Transfers into Sipps are a major issue particularly given the defined benefit pension focus, which is highlighting the need to be clear on charging as well as on investment advice.”

The research was conducted in February 2017 by PollRight to 107 advisers specialising in pensions planning.

laura.miller@ft.com