FCA plans to force Sipp firms to include the margin they earn on cash accounts as charges are “misdirected”, say firms.
Last week the FCA gave the Sipp industry six months to include the interest retained on cash accounts in projections, effect of charges tables and reduction-in-yield measures.
In September, Money Marketing revealed how the tens of millions providers earn a year from margins on cash was the only thing keeping some firms in business.
But Dentons technical services director Martin Tilley says: “The FCA’s interest in the Sipp trail interest is warranted but misdirected.
“The consultation looks at any trail being a ‘charge’ and the FCA’s focus is on charges. Whereas in fact what the consumer needs to know is what return the default cash account is going to pay.”
Tilley says labelling the margin taken as a charge risks misleading customers because firms may retain more because they have negotiated better rates than other providers.
A director at one of the largest providers – who wished to remain anonymous – agrees including margin as a charge would not help customers.
He says: “This only makes illustrations more complex for providers, adviser and customers. There’s a wider question that needs to be answered – are current illustrations even appropriate comparisons for complex products like Sipps?”
But Liberty Sipp sales and marketing director Matthew Rankine says: “For too long, too many Sipp providers have been quietly pocketing the interest earned on their clients’ money – and burying the practice in the fee schedule.”