Sipp providers brand FCA illustrations rules ‘not fit for purpose’

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Sipp providers say the key features illustrations they are required to produce for clients are “worthless” and “not fit for purpose”.

Since 2013 Sipp firms have had to provide KFIs in the same way as other pension providers.

In October this year the FCA proposed adding the margin retained on clients’ cash holdings as a charge on the illustrations.

But firms say KFIs do not help advisers or clients compare providers.

Suffolk Life head of communications and insight Greg Kingston says: “There’s a problem for both consumers and advisers. If you go back to the true purpose of the illustration it’s to create a scenario where you can compare costs and charges. As soon as you introduce variables it becomes far less useful.

“For instance, variables that providers put in for growth rates will vary so immediately from year one your projection is worthless.”

Dentons director of technical services Martin Tilley says: “The illustration process provides a lot of factual information on day one, but within seven days it’s factually inaccurate.

“They are extremely detailed but after a year the assets that have performed less well end up being lower proportions. Using the document in future without rebalancing it on a regular basis is self-defeating.

“Unfortunately the regulator doesn’t make that clear to the individual. It’s very quickly obsolete, it’s not fit for purpose.”