Non-regulated property companies trying to attract consumers by offering investment opportunities into Sipps are stirring up debate over the marketing of residential property into property schemes.Industry experts are concerned over non-regulated developers advertising 40 per cent discounts on properties bought through Sipps, arguing that an ad which promotes use of a pension wrapper constitutes a financial promotion and should be part of a regulated sale. FSA spokesman David Whitely says: “Under our regulations, a financial promotion is anything that could be taken as an invitation to invest. Broadly, under our regulations, all promotions need to be clear fair and not misleading and, in the case of investments, balanced.” Pension Associates Limited business development director Richard Mattison says he is concerned that ads promoting residential property in Sipps are failing to show the downside. He says: “I do think that if an ad involves the potential sale of a financial product, the usual warning about values going down as well as up should be included.” Which? director of policy Mick McAteer says he has fears that consumers, having lost confidence in the conventional pension industry and stockmarkets, are turning to property. McAteer says: “This makes consumers vulnerable to aggressive selling and promotional practices. I do worry about techniques that are designed to get consumers to make u their minds quickly when it involves risky ventures such as property investment.” The FSA says it plans to carry out a further consultation on Sipps leading up to A-Day but the Treasury says there are no plans for property companies putting out such ads to become regulated either leading up to or following next April. On the broader issue of whether regulatory control should be exerted over what investments can be held in a pension, Mattison takes a laissez-faire view, arguing that people should be allowed to put what they want into their Sipps. He says: “One can compare Sipps with SSASs, which have been around since the late 1970s and they seem to be doing all right. One has to note the name itself – it is a self-invested scheme so the consumer has the choice as to what is put into the scheme.” Dennehy Weller and Co managing director Brian Dennehy believes that some intervention in what is allowed in Sipps is required. He says: “It is vital that the FSA takes charge. They have tried to fire across the bows but they have missed the target. This is a serious problem waiting to happen. It would be better if the regulator becomes more proactive. There will be widespread industry support if signs appear that the FSA is starting to do something about it.” Hargreaves Lansdown head of pensions research Tom McPhail says: “I think it is a very undesirable situation to have both a personal pension and a Sipp – one that is regulated and one that is not. That is not a good set-up.” Hornbuckle Mitchell director Viv Belcher says she has witnessed a huge number of property agencies using aggressive selling tactics but believes the reality will not live up to the hype. She says: “It is not going to be the bonanza that people are expecting. If clients do decide to take up these schemes, they will certainly need advice. I think there are a limited number of people who will have the funds in their pensions and the wherewithal to enter into these schemes. There are so many pitfalls to look out for.” Suffolk Life director of sales and marketing John Moret says the main question for IFAs, having found a market, is whether or not to advise on these schemes, warning that some of the individual investments held within the Sipp wrapper might be regulated while others might not. He says: “This is a difficult one for advisers. Do they advise on them or not? It might be that IFAs find themselves directing clients down the execution-only route. This is a very grey area.” Within financial services, such areas of uncertainty might suggest danger zones for misselling or claims but the Financial Ombudsman Service says it does not see Sipps as a high area for complaints. FOS spokeswoman Emma Parker says: “Generally, we do not see Sipps as a huge area for complaints. Where we do, it tends to be around the appropriateness of the product for the client more at the initial advice stage.” She warns IFAs to ensure they are fully informed about all the potential risks, as with any investment scheme. Parker says: “It is important that IFAs familiarise themselves with all the aspects around the product before they give advice.” Skandia says enough information is available to help IFAs make the right decisions and reduce the chance of any liability falling their way. Pensions brand manager Billy Mackay: “As the Sipp market is becoming increasingly widespread, the natural argument is that they should be regulated. However, by and large, this is a product sold through independent financial advice and intermediaries can readily access all the inform-ation they might need to fully understand the product, enabling them to properly advise their clients, so any risk should be minimal.”
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