FSA delays Sipp disclosure rules but sets out RDR KFI changes

8 November 2011 11:13 am | By Natalie Holt

The FSA has delayed final rules on Sipp disclosure requirements following widespread industry concern that the regulator’s proposals would dramatically push up costs for pension administrators.

The regulator published a consultation paper in February calling for providers to supply illustrations and projections for all investments held within a personal pension scheme, other than commericial property, commodity investments, synthetic exchange traded funds and shares.

At the time it was suggested by Standard Life that the complexity and huge costs involved in projecting for the tens of thousands of funds in the market could force half of Sipp administrators out of business.

In a policy statement on product disclosure published today, the FSA says it has decided to consult again on the requirements given the wide range of industry feedback prompted by the earlier paper.

The FSA says: “The responses to our proposals to change the disclosure requirements applying to personal pension schemes including Sipps, showed a wide divergence of views, and raised further issues and concerns.

“We have reflected on these responses and, in order to best achieve the aim of a fairer, more transparent and competitive personal pension scheme market, we have decided to re-consult on revised disclosure requirements.”

Disclosure rules for personal pension schemes will not alter with effect from April 2012 as originally proposed, but the FSA says these rules are likely to be amended at a later stage.

The policy statement does however set out rules in relation to how charges are set out for advised individual pension business within key features illustrations.

From December 31, 2012  the effect of charges table and reduction in yield information will need to show the separate effect of product charges and adviser charges facilitated through the product.

The effect of charges table will have to include an additional column  to show the accumulated fund if there were no charges. Firms will have flexibility to change the format of the table when no adviser charges are being facilitated or if the table is being used for other business.

KFIs will also need to show whether any adviser charge is deducted before or after investment into the product.

The FSA expressed surprise at the lack of responses to the consultation paper from advisers, as advisers have a significant role in using and explaining KFIs to their clients.

The regulator also noted that few firms have adopted the latest high level rules published in 2007. The FSA says several respondents to the paper seemed to doubt  whether KFIs should include charges for external funds held with a product wrapper, which is required by FSA rules.

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