View more on these topics

Question of trust over Sipp provision

Jan Regnart’s article provides a valuable and informed insight into some of the reasons why many providers of self-invested personal pensions appear to have delayed submitting their application for FSA authorisation. However, the issues she describes so accurately do not apply to a small number of Sipp providers that are already regulated and have been so since Sipps were first launched back in 1988.

What is not widely understood is that there are two ways of establishing a Sipp, neatly summarised by the Revenue in guidance note IR76 2000.

The first way is trust-based, which is the most commonly used because it is relatively quick and simple to establish and – until April 2007 – is unregulated by the FSA. When commentators refer to Sipps, they are usually referring to trust-based products.

The other way is as a personal managed fund attached to a unit-linked insurance policy. At a time of potential uncertainty over the continuity of some Sipp providers and the potential for imminent regulation to cause disruption and increased operating costs, providers using this structure can provide significant benefits to IFAs and their clients.

Years of complying with regulatory requirements means these providers have had plenty of time to develop the robust back-office systems and controls that trust-based providers are encountering for the first time.

At the same time, insurance-based providers have also had to satisfy the FSA of the adequacy of their capital provision and associated management of risks.

Insurance-based providers also have considerable experience of working within the FSA’s conduct of business rules, including those related to financial promotions. Some trust-based providers claim to have previously treated their Sipps as regulated but there is a world of difference between complying with some aspects of regulation when it is expedient to do and having to comply across the board because now it is mandatory.

It is also worth pointing out that the inherent robustness of the insurance-based Sipp structure has long been recognised by the Department for Work and Pensions and it is the reason why the DWP allows only insurance-based Sipp providers to offer the self-investment of protected rights.

Depending on your point of view, there are some limitations (or additional protection) in dealing with insurance-based providers. For example, they may be more selective about the types of commercial property they will accept, particularly if there is any suggestion of a contamination risk. They are also subject to some restrictions about the more speculative types of collective investments they can accept, due to the permitted linking rules, but they can normally cater for the majority of investments that clients typically want to invest in.

As Jan Regnart so rightly points out, running a Sipp business requires certain skills, expertise and experience to ensure that the operation is efficient and provides advisers and their clients with a sustained level of continuity.

IFAs need to be aware that they do have a choice. They do not have to risk their reputations and their clients’ interests in deciding which trust-based Sipp providers will cope best with regulation. Some insurance-based Sipp providers have already been doing it for years.

Tim Fox
Head of compliance
Merchant Investors


GE fined £610,000 over PPI failings

The FSA has fined GE Capital Bank £610,000 for failing to have adequate systems and controls in place for selling payment protection insurance. The regulator is expected to take enforcement action against up to five further PPI providers.

Poor Abbey PR Charles Ansdell…

Poor Abbey PR Charles Ansdell had the fright of his career when a less than observant MM hack sent him an email about a lunch meeting on February 22, not realising it was in fact January 22 at about 3pm. His response was: “Bejeezus, that had me worried for a second. Never send PRs emails […]

Liverpool Vic withdraws income protection plans

Liverpool Victoria has withdrawn three of its income protection contracts from the market, leaving only two providers in the locum IP sector.The firm has temporarily withdrawn its locum IP plan, executive protector and Flexi-Protector products from the market as part of a review of its offerings.Head of intermediary marketing strategy Justin Harper says: “The locum […]

Investment clock economic update

In the latest Investment Clock economic update, Ian Kernohan, Senior Economist at Royal London Asset Management, discusses the implications of the US Federal Reserve’s recent hike in interest rates and upcoming French presidential election. The value of investments and the income from them is not guaranteed and may go down as well as up and […]


News and expert analysis straight to your inbox

Sign up


    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