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FSA warns Sipps not always most suitable

The FSA says it is concerned that investors are being put into Sipps when a personal pension or stakeholder may be equally appropriate and potentially cheaper.

The regulator has carried out a ‘small thematic project’ to review financial planning advice and highlighted concerns that advisers are recommending Sipps purely on the basis that they offer a wider fund choice and not because of the Sipp’s allowance of self-selection of actual investment assets.

The FSA says: “Under these circumstances, a stakeholder pension or personal pension may equally satisfy a customer’s needs, potentially at a lower cost. Sipp providers operate a variety of charging structures and advisers need to ensure that they carry out proper cost comparisons with the alternative personal pension and stakeholder arrangements.”

Advisers should be able to demonstrate that the investor requries the potentially greater investment flexibility and control afforded by Sipps, it adds.

The FSA stresses that the RU64 rule applies to Sipp advice and so advisers must provide evidence that the arrangement is at least as suitable as stakeholder.

In other work, the regulator says it has completed its planned visits to 10 adviser firms as part of its multi-manager thematic work, as first revealed by Money Marketing, and says it will publish the findings in November.
It also fired off a warning about financial advisers branding themselves ‘independent’ when they are not and warns that any reference to ‘statutory rights’ in client documentation must be accompanied by further details.


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