The FSA says it has identified widespread failings among Sipp operators, which risk causing “significant consumer detriment”.
The regulator published the results of a thematic review into the Sipp market this week. It found evidence of poor firm compliance with regulatory requirements, generally poor systems and controls and inadequate controls over the investments held within some Sipps.
The review was based on responses from a questionnaire sent to 72 Sipp operators and seven onsite visits conducted between August and September 2011 focused on general compliance. A further seven firms were selected for onsite visits that focused on compliance with client money and assets rules.
The FSA says the review confirmed its concerns about poor firm conduct outlined in its Retail Conduct Risk Outlook in 2011.
It says: “These findings make it clear Sipp operators have the potential to lead to significant consumer detriment through a failure to adequately control their business.”
The FSA will launch a programme of work designed to strengthen capital requirements, disclosure and inflation-adjusted projections.
Suffolk Life head of marketing Greg Kingston says: “These findings will be very damaging for the Sipp industry. The question now is at what pace does the regulator want to introduce change? It cannot allow a disorderly collapse of providers because that will not be in consumers’ best interests.”
Rowanmoor Pensions head of pensions technical services Robert Graves says: “The entire industry is being tarred because of the bad behaviour of a few bad firms.”