As part of the investigation, which is being led by the FSA’s small firms division, providers must answer a questionnaire and submit promotional material and other documentation.
The FSA says a further 100 medium to large Sipp providers are exempt from the probe because they are relationship-managed by the regulator.
The top five Sipp providers took 68 per cent market share in September 2008, according to the FSA’s retail investments product sales data.
Around 10 product providers are thought to have fewer than 500 Sipp contracts on their books, with some as few as 23.
Syndaxi Chartered Financial Planners managing director Robert Reid believes the FSA will be looking at the fact that many Sipp providers take a slice of the interest rate received on customers’ cash accounts.
He says: “The FSA will definitely be looking at the level of interest that Sipp providers are taking on bank accounts and where that has been used to subsidise charges as opposed to charging a straightforward cost. That practice is very opaque and the smaller firms tend to take a bigger cut.”
AJ Bell marketing director Billy Mackay says: “The key issue is the way that companies promote their products. The regulator will be looking to see that any promotions truly reflect the nature of the risks involved. It will also look into whether small firms are providing customers with sufficient infor- mation about the nature of their charges.”
An FSA spokesman says: “This work aims to assess whether small Sipp providers are adhering to FSA principles and rules and to identify any issues that require our attention or intervention. If we find any issues that cause us concern we will take the appropriate action.”