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Categories:Pensions,Regulation

FSA plans could push 50% of Sipp administrators out of business

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john_lawson.

Onerous FSA proposals which could force Sipp providers to produce specific key features illustrations for certain investment products would force 50 per cent of pensions administrators out of business, Standard Life says.

A consultation released yesterday proposes revising rules so illustrations and projections are required for all investments held within a personal pension scheme other than commercial property, commodity investments, ‘synthetic’ ETFs and shares.

Standard Life head of pensions policy John Lawson (pictured) says providers who use generic illustrations would have to produce “tens of thousands” of individual projections for clients if the proposals are pushed through.

He says: “This has come out of left field. Given that there are thousands, if not tens of thousands, of funds in the market, the difficulty will be projecting for any one given fund. The cost of it is enormous, I think this could put 50 per cent of Sipp administrators out of business.

“We’re talking about costs in the millions of pounds to build a system which can do this, and doing it on an individual basis might be £100 a quote. Anybody that’s a Sipp administrator whose not an insurer will be thinking ‘this is going to be horrendous’.”

A J Bell marketing director Billy Mackay says: “If you look across the market, providers who historically haven’t provided that information are going to have to invest time, effort and money in building it. There’s no doubt it will stretch the resources of some firms.”

Hargreaves Lansdown head of pensions research Tom McPhail says the Sipp provider will seek greater clarity from the FSA on the intentions of the proposals.

He says: “The FSA are putting up some interesting ideas, but I’m not clear whether we’ll end up with generic illustrations or customer specific, and the extent to which we would need to quiz the customer about their investment intentions ahead of the final purchase. They also seem to be suggesting these could be optional, so we’ve just got to see where we get to in the discussions.”

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Readers' comments (10)

  • One gets the impression the FSA wants to put us all out of business except the major players perhaps and even they are thinking twice now the costs and implication of uttering any sort of advice are so heavy and stay with you until you die.

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  • The Banks and Providers who were right behind the RDR for greed reasons are now starting to wish they hadn't been so hasty!!

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  • The cost of producing an illustration does not have to be as excessive as suggested. We produce lots of systems for redress and don't believe the system will be as expensive as mentioned...

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  • Out with the FSA in with the new, there will not be a lot left to regulate. All would have been forced out of business.

    One thinks they should be helping business not forcing more out of business at this rate the financial deficit will never be lifted even for our childrens children !!

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  • No Suprises.

    This is exactly what the consumer needs, less choice and greater costs.

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  • Everybody else has to produce illustrations to strict but fair rules for just about every product, why should SIPP providers get away with only having to do generic ones because it's too difficult and expensive. Sorry, but that is not a sound basis for an argument, if it's because you have too many funds then don't offer as many, or leave it to SIPP providers that can do a cost effective quote. A quote is a vital part of any business transaction, FSA are being reasonable on this.

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  • Andy Newman - the whole point of a fully bespoke SIPP is to offer no restrictions on what you can invest in. Why limit funds that people can invest in, when there is a great demand for weird and wonderful investments, just to be able to produce an accurate illustration?

    Platform SIPPs with limited fund choice are very different from full bespoke SIPPs so to group them under one umbrella for illustrations isn't correct. How do you illustrate accurately on a fund that holds many different commercial properties, EPUTs, OEICs, unlisted company shares and equities without using a generic growth rate across the whole fund/asset class?

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  • I think that most people would agree that investors should be given all the relevant useful information to enable them to understand and compare the charges of financial products. And this should certainly apply to a SIPP. However, there is a world of difference between a 'platform SIPP', which offers a specific range of investments, and a bespoke SIPP, which allows all investments. In the latter case it surely makes sense for the SIPP to produce illustrations on a standard set of assumptions so that the SIPP providers' charges can be compared on a sensible basis. Then, with regard to the investments held in a bespoke SIPP, the provider of those investments (and not the SIPP provider) should produce any required illustrations - the SIPP provider is actually the customer of whoever is offering the investment so there is no logic whatsoever in the SIPP provider producing illustrations of the investment charges made by a third party!

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  • Fear not, I could built it in to your existing platform or as a standalone system, or add it to my own web browser type admin systems. Costs would be low as we have been doing this type of thing for over 10 years in the US. Our US clients require a much higher degree of investment information than in the UK.

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  • With regards to the comment about banks and providers being greedy, I don't understand that really. Perhaps it is some IFAs who are being greedy and rebroking pension /investment cases at the 5 yr point ( earlier sometimes !) playing musical chairs with client's money to generate initial commissions time and time again on the same money ! RDR will put a stop to that !

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