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FCA issues warning over Sipp advice failures

The FCA has issued a further warning to advisers who encourage clients to invest their pension in unregulated products through Sipps.

In January last year, the regulator raised concerns that some firms were advising on pension transfers to Sipps without assessing the advantages and disadvantages of the underlying investments to be held within the new arrangement.

Despite the initial warning, the FCA says further supervisory work has identified “serious and ongoing” Sipp advice failings.

The FCA says: “We think advising on the suitability of a pension transfer or switch cannot be reasonably done without considering both the customer’s existing pension arrangement and the underlying investments intended to be held within the Sipp.

“In the cases we have seen, customers’ existing arrangements were invariably traditional pension plans invested in mainstream funds or final salary schemes, with the customer generally having no experience of non-mainstream propositions and many having very limited experience of standard investments.

“The new arrangements firms proposed were to transfer or switch the customers’ pension funds to a Sipp, with a view to investment in non-mainstream propositions which were typically unregulated, high-risk and highly illiquid investments.”

The regulator also found that many advice firms had inadequate professional indemnity insurance cover or had failed to disclose to their insurer the nature of their business model.


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