View more on these topics

MM leader: The stealth margin grab by Sipp providers

Natalie Holt website

For Sipp providers, while all eyes have been on the looming changes to capital adequacy rules, another storm has been quietly brewing.

Sipp providers negotiate the rates paid on cash held within the wrapper and then offer an interest rate to clients. However there is not always a clear line of sight between what deals providers agree with banks and the rates ultimately offered to savers.

What is more, some providers are taking much more for themselves than they are paying out to their customers. To be clear, we are talking about the rates paid on Sipp cash holding accounts here, rather than deposits or cash being used as part of an asset allocation strategy.

Our snapshot of the Sipp market gives an insight into who are the saints and sinners when it comes to skimming off client cash.

There are several issues raised by this stealth margin grab by Sipp providers. The obvious one is should firms be engaged in this practice at all, or should all of the margin in fact be passed to clients? Some firms already do this, so why are they penalised for a business model that rewards customers instead of the providers’ directors?

Another concern is how sustainable a model geared around margins on cash can be. Some providers are said to have built and estimated future profits solely on this income, which is all well and good in a rising interest rate environment but when rates are at record lows the model looks somewhat unstable.

The screw has already begun to tighten. Royal Bank of Scotland recently announced plans to slash interest from 0.75 per cent to 0.4 per cent from February, and will stop paying interest on Sipp cash accounts altogether from March.

There is also the question of how creaming off at clients’ expense sits in the supposedly transparent, post-RDR world. In its bid to clean up the retail investment market, the regulator all but forgot about platforms until the last minute. It looks set to do the same here.

Sipp guru John Moret puts the hit to revenues from squeezed margins on cash at £80m a year. On top of this, the cap-ad rules signal a wave of mergers and acquisitions, and the accompanying challenges for due diligence. There is also the as yet unknown impact of any reforms to pension tax relief on providers’ bottom lines. Sipp firms are in for a bumpy ride.

Natalie Holt is editor of Money Marketing – follow her on Twitter here



Sipp firms split over insistent clients

The Sipp market is split over how to deal with so-called insistent clients who want to transfer out of defined benefit schemes. Despite FCA guidance published in June, advisers and providers remain concerned over the potential for future claims on pension transfers. According to data collected by the regulator as part of the Treasury’s probe […]

Martin Tilley 200

Martin Tilley: What happens when the Sipp lifeboats are full?

The FCA’s third thematic review of Sipp operators and the increase in the benchmark for capital adequacy requirements have reduced the appetite and ability for some in the marketplace to continue in the long-term. The introduction of the tapering annual allowance from April next year is also likely to have an impact on new contributions […]


Providers raise concerns with HMRC over Axa family Sipp

Providers have approached HM Revenue & Customs with concerns over the “allocation of growth” feature of Axa Wealth’s family Sipp, Money Marketing understands. Axa Wealth has been battling delays in setting up new family Sipps as part of its Family Suntrust product, but denies this is connected to the controversial allocation of growth practice. This […]

Tax allowances and exemptions

Helen O’Hagan, Technical Manager at Prudential, looks into the planning strategies that can deliver considerable tax savings for your clients. Inheritance tax (IHT) Consider Margaret, featured on our Planning Matters family hub, who is a sprightly eighty year old with four children and several grandchildren. She’s recently been widowed and IHT planning is high on […]

The curious market reaction to Brexit

Written by Mike Riddell29 June 2016 Headlines over the past few days have screamed about record falls in sterling, record low bond yields and massive falls in equity prices. However, if you take a slightly longer view of markets rather than simply the one- or two-day reaction, I think it’s amazing how little markets have […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. I think its a bit unfair to use the term “stealth” as most, if not all, Providers disclose this.

    And if you are using a SIPP to keep large amounts of cash for a long period of time maybe a SIPP isnt the right pension vehicle for you.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm