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Sipp fears for ScotLife

Scottish Life says it has serious reservations about entering the group Sipp market due to concerns about breaching treating customers fairly rules.

The firm, which will launch its individual Sipp this year, says it is still investiga-ting whether to follow this up with a group offering.

Head of corporate business Mark Polson says the FSA’s TCF rules are proving to be the main sticking point.

He says group Sipps are typically more expensive than traditional group personal pensions. He argues that in most companies’ pension schemes, 90 per cent of employees go into the default fund and if the company chooses a group Sipp, these employees could end up paying a higher base cost for no tangible benefit.

He says there are also problems if an employee with a group Sipp moves to another employer which does not offer a group Sipp and refuses to pay into it.

Polson says: “I am very nervous about putting group Sipps into an unsophisticated workforce. Group Sipps generally have a more expensive base rate than normal GPPS but most people in employers’ pension schemes end up in the default fund. If they are paying for flexibility they don’t use, is this treating customers fairly?”

AJ Bell managing director Andy Bell says: “We’ve had reservations about group Sipps for similar reasons. If the majority of employees are going into a default fund, you would struggle to find anyone who would say a group Sipp was suitable. I am very uncomfortable with group Sipps being provided to secretarial and admin staff. I see group Sipps more as a replacement to the EPP market.”

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