View more on these topics

How to break the Sipps and Ucis misselling cycle?

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Sadly, there are enough stories about dodgy investments held in Sipps that have gone wrong that if you are not careful, you can become immune to it. But it is only once you start to consider the extent of Sipp misselling that you start to grasp the scale of the problem.

Financial Services Compensation Scheme levies over recent years have been driven by the volume of Sipp claims. In the last two years alone, the bill for life and pensions advisers, plus interim levies, takes the total cost of Sipp compensation to almost £260m.

Some are hopeful that we maybe nearing the peak when it comes to the level of Sipp claims, given that consolidation in the market will free up more money to carry out the appropriate due diligence on underlying investments. But even if that proves to be the case, the data we already have points to a backlog that may take years to feed through to the FSCS.

Between April and September, the Financial Ombudsman Service received nearly 900 Sipp-related complaints. No doubt thanks to pension freedoms, Sipp transfers are on the rise, and according to data from Origo are up 115 per cent in the two years to March.

Sipp providers are frustrated that claims are being characterised under the umbrella term “Sipp misselling”, when more accurately another acronym is at fault: Ucis.

A lot of these issues are intertwined. The Government unleashing the power of pension freedoms meant Sipps became the vehicle of choice for taking control of investments and accessing a pension more flexibly. At the same time, purveyors of unregulated collective investment schemes
saw an opportunity to push their wares. Sipps and Ucis are a common thread often found in pension scams, which the Government is now belatedly trying to curtail. And so the circle is complete.

Something has clearly gone wrong. Apparently traditional pension funds and investments are just not cutting it. In their droves, savers are turning to diamonds, overseas property, Jatropha trees in Cambodia, storage pods and car parks as the key to their wealth in retirement.

We desperately need to break the cycle on endless Sipp claims falling on the FSCS. A ban on cold-calling is only just the start.

Better regulation of Sipps, and the kind of investments that can be held in them, are the obvious next steps. Advisers cannot keep paying for Sipp failures ad infinitum.

Natalie Holt is editor of Money Marketing



Counting the £260m cost of Sipp misselling

The pensions industry is calling for fundamental reform of how Sipps are regulated as advisers face the prospect of another substantial Financial Services Compensation Scheme interim levy. Sipp firms believe restricting what investments can be held in Sipps and introducing more flexibility in occu-pational pension schemes could help reduce the burden of claims falling on […]


FCA looks to target unregulated firms in new ‘mission’

The FCA is eyeing action on unregulated firms and vulnerable customers as it sets out a new “mission”. The FCA today began a consultation on its mission document, a set of principles that will inform the regulator’s strategy and day-to-day work. The FCA says the purpose of the mission is to give clarity over the objectives […]

Trusts and Taxations

Take a look at the trusts and trustee taxation video – The definition and classification of trusts. Once you’ve viewed the boxset, visit our Test Centre to test your learning and get your CPD certificate. View here


News and expert analysis straight to your inbox

Sign up


There are 16 comments at the moment, we would love to hear your opinion too.

  1. When will the press realise that these dodgy investments have not been packaged as UCIS for at least two years now. Look up NMPI and NRRS, the former does include UCIS but its much wider and catches share scams. The FCA are currently consulting on changing the definition to make it wider but of course the scammer will just get lawyers in to get around it again like they did the first time.

  2. Just stop regulated advisers recommending unregulated products or them being held in regulated products such as ISAs, SIPPs etc. unless you have prior permission from FCA from some date moving forward. You then come under the regulatory microscope earlier and pay a risk based levy if you wish to stay active in this area.

    Make it expressly clear that it is not regulated, hence NO investor protection applies and stop these products being brought into the regulated space through the back door.

    Make all regulated providers and regulated wrappers report ALL historic non-regulated sales / products so the regulators can get a feel for who is active in the area before more problems occur.

    I also cant quite understand, given the FCA’s normal eagerness to expand its scope and regulate as much of the consumers life as possible, that the concept of unregulated investments is ended and everything is regulated by the FCA moving forward.

    • The purpose of the FSCS is to act as a fund of last resort to compensate investors for losses incurred as a result of bad (regulated) advice on any investment, regulated or not. You cannot selectively exclude unregulated products from that raison d’être, any more than the FCA would allow firms not to have PII cover in respect of sales of unregulated products or declare that firms have no liability for the consequences of advice to invest in them. To do so would be a rogues charter to flog unregulated junk by the boatload.

  3. There should be an outright ban on SIPP sales, and a new permissions put in place by the FCA, to monitor SIPP sales in the future with higher qualifications needed to advise on this class of pension, with SIPP providers carefully monitoring the sales of these products and checking that permissions are in place, it also should be mandatory, that PII must be in place to cover SIPP claims.
    I’m a Protection Adviser and I’m sick of picking up the tab, for the unprincipled SIPP provider and advisers out there and in the near future will walk away from the shambles that has become the FSCS!

  4. What, say, SIPP companies and platforms of all varieties were required to notify investors of all investment purchases that were unregulated and, at the same time, that there would be no compensation if that unregulated investment failed?

    That notification should be copied to the FCA and advisers should also have to notify each and every unregulated product they transact – on the buy side – to an FCA department that focuses only on regulated advisers who use unregulated products. I suspect that all of the numbers would fall quite quickly.

    The FCA should then check each adviser company’s PI insurer is aware of the unregulated activity.

    Seems like a starting point to me.

  5. Hi Natalie, a good article and you are spot on when you say the problem here is the underlying investment. The SIPP product itself is not broken and I would expect very few FSCS complaints/claims for losses on “standard” investments such as FCA investment funds, commercial property, etc.

    The more worrying thing about this is that in my view there are still thousands of Harlequin and other UCIS claims still to emerge. Some good SIPP providers like my firm rejected Harlequin, Jatropha, Storepod and yet we are all tarred with the same brush. Captal Adequacy requirements are likely to reduce SIPP providers willingness to accept these, but it has come 5 years too late. Sadly the claims will keep on coming for a number of years to come.

  6. Exclude all UCIS from FSCS compensation and make the floggers of these schemes issue tobacco style warnings to their greedy customers.

  7. Don’t allow regulated, insured advisers to sell unregulated, uninsured products.

    Next question!

  8. Sipps aren’t the problem. The problems are those who sell UCIS (and invariably use a SIPP or SSAS to access them). It’s the UCIS which is ‘sold’ and I suspect in most cases because it’s in the interest of the ‘salesman’ rather than the client.

    It’s not that long ago when I saved someone who got cold feet about her £35k pension transfer when Companies House were in correspondence with regard to her setting up a Ltd Company (in order for the SSAS to be formed and the UCIS to be held). The pension being transferred had guaranteed values and GARs too. Thankfully she called before it was too late.

    The secondary problem is that regulation and disclosure is so complicated that investors take what they are told at face value and believe that the Cape Verde property investment indeed will deliver 10% p/a and that the rent guarantee is worth more than the paper it’s written on or the car parking space in Dubai indeed exists and that the investment is structured with the investor’s best interest at heart.

  9. This is a really interesting debate, and one that needs to be driven to the top,of the agenda. It isn’t just about cold calls, or tighter SIPP regulation. There is a strong argument for much stringer due diligence for SIPP providers and indeed for ceding schemes. Are the ceding schemes taking enough steps to checks the destination of transfers out? Equally, are SIPP providers genuinely confident about the value of underlying investment options within their wrappers? As a partner in a specialist pensions and investments claims management company, I’m currently concerned not simply about consumers losing significant sums to unregulated investments via SIPPS, but also about FS Pension Scheme transfers to other esoteric areas, such as QROPS. I’m confident that tighter co-operation between FCA, FOS and FSCS could create an “alarm bell” process that would avoid issues like the recent Harlequinn investment affecting quite so many consumers – most of whom are financially inarticulate. There are also concerns re the impact of the “Pensions Freedoms” on the scale of potential pensions scams. I asked a question about this on your recent MM Wired sessions, and it’s a real concern. So yes we need tighter regulation of SIPPS, we also need broader co operation from the regulators to flag growing issues, and stricter due diligence on behalf of ceding schemes and SIPP administrators. All of that would reduce the opportunity for poor advice and straightforward scams to succeed! When you spend every day discussing the impact of scams and failed investments with clients, it’s actually a story of human suffering that we need to address – people’s lives are in some cases being ruined by these experiences. It would also make sense to broaden the base of FSCS funding, and remove the compensation cap. Why on earth do well regulated, well run IFA firms bear the whole cost of rogue entrants into our industry? I can’t believe that any other industry sector would tolerate such an approach!

  10. If you squeeze SIPPs, people move to other vehicles to facilitate their scams – SMOPS, MMOPS, ROPS, whatever. It doesn’t solve the core issue that people’s lives get wrecked, so there is an argument that focussing exclusively on SIPPs could be more driven by advisers’ economic self-interest than genuine concern about the problem. What will we say when section 48 advice claims start emerging?

    The real challenge here is understanding where we are in the bell curve of claims, which is dependent on how long it takes people to realise they’ve been scammed and/or how long it takes a ratty investment to blow up. Have we seen the worst yet, or is that still to come?

    We moan at the regulators for not doing more to stop dodgy SIPPs because of the claims that are hitting us now, but that’s such a lagging indicator of the harmful behaviour that for all we know it could have been all but stopped.

  11. Richard Anderson 8th December 2016 at 2:12 pm

    For my part, I think that SIPPs are an excellent product for appropriate clients. They allow a client to hold investments in funds from a wide range of providers, rather than just one insurance company’s managed fund, and to switch those investments whenever necessary. The client, therefore, doesn’t have to be stuck with a limited range of ‘closed funds’ if their particular insurance company decides to wind down. This makes SIPPs (with a sound provider) extremely future-proof. They also allow investment into commercial property for those who may wish to do so (business proprietors etc), individual shares, ETFs, etc etc, so are very flexible, and nowadays nowhere near as expensive as they used to be.

    As with so many things in life, it is the mis-use of SIPPs that results in the bad press, and sadly, the mis-use is often not by the regulated adviser community.

    The first precaution should be that SIPP providers will only accept applications from authorised advisers (unless on a D2C basis). This should give the client FOS and FSCS protection on the wrapper. Then, the SIPP provider should only accept instructions to purchase UCIS from the same authorised adviser, who completes a declaration that they have given the advice and take responsibility for it. The situation where un-regulated individuals are getting involved in a regulated wrapper should be stopped, and the best policeman for that has to be the SIPP provider.

    There may be genuine D2C planholders who want to invest in a UCIS. If they are doing this without influence or input from any other party then they should sign a disclaimer waiving any right to FSCS protection.

    As ever, its those individuals who are circumventing the regulations that are causing the damage.

    Don’t throw the baby out with the bathwater. In theory, the availability of SIPPs should serve to stimulate healthy competition and keep other providers offerings as competitive as possible.

  12. I thought that this had already been done at the end of 2012? Since then regulated IFA’s haven’t been able to sell any UCIS style funds unless they can demonstrate that the clients are sophisticated investors (as per the FCA definitions). I would have thought that this will have stopped such regulated advisers from selling them anyway won’t it? If somebody accepts a recommendation from a non-regulated adviser into a non-regulated fund then surely its caveat emptor?

  13. There is no SIPP misselling scandle!

    There always has been and, as the FCA doesn’t do anything about it, always will be cowboys flogging dodgy investments. They have just managed to find a wrapper for them.

  14. See I thought the SI stood for self-invested……when in fact it should stand for, increased fees charged by IFAs for selling clients the the same funds as in a stakeholder plan. Of course a nice IFA will sell a stockbroker service selling the client a fund but run by someone with no proven skills either….it says SELF INVESTED so why is anyone compensated if they choose their own investments. MAKE SURE IT ISN’T ABOUT ADVICE BUT SUITABILITY.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm