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Sipp firms feeding clients’ cash into their own funds

Sipp providers have come under attack for channelling clients’ money into their own funds.

Aegon is directing around £416m of Sipp investors’ cash into its insured funds annually as it forces customers to invest regular contributions into these funds.

The average annual contribution across Aegon’s 138,600 plans is £3,000.

LV= has channelled at least £18m into its insured funds by requiring all Sipp investors to have a minimum £3,000 invested with the firm.

LV= has over 6,000 Sipps on its books. It also charges £100 a year if clients choose to use an investment manager other than its five affiliates.

Suffolk Life and Rowanmoor penalise Sipp investors who choose unaffiliated investment managers. Suffolk Life charges up to £75 while Rowanmoor charges £50.

LV= head of pensions Ray Chinn says: “Because we are an insurance company, there has to be a contract of insurance within our plans and the £3,000 forms that contract.

“We are not quite as free as true Sipp providers but it allows us to be more flexible in other areas such as not charging VAT on our Sipp fees.”

An Aegon spokesman says: “Regular premiums can only be paid into the insured element of our plan. The Sipp market is made up largely of lump sum investments so that is what we currently support.”

Suffolk Life marketing director John Moret says: “We have a data feed with a number of investment managers. Without this everything is paper-based which means extra cost and risk.”

Richard Jacobs Pension and Trustee Services managing director Richard Jacobs says: “The firms that force you to have money here and money there to me are not Sipps. Sipp clients do not want something which ties one hand behind their back.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. This is how they attract business, especially from people who dont take advice. Their headline rates look cheaper than full on SIPP’s. When you look deeper you realise what the true cost is. It would be interesting to find out how much of their business is tied/direct opposed to fully advised.

  2. I know everybody is bashing Towry Law at the moment, nearly 100% of their Towry Law SIPP assets are invested in their in-house Unit Trusts.

  3. Remember this is business – war waged by other means. Don’t moan, expose the sham provide a better solution and take the business.

    Furthermore if this business is done directly anyone who thinks they can do it better themselves without taking proper advice is the rightful prey of anyone out there who has a legitimate offering regardless of its cost.

  4. James Hay don’t get a mention but they are forcing everyone to use their Select Fund range by making the fees £14 per fund you invest in any form of Trustee Investment.

    Yes £14 per fund ! If you have a balanced portfolio of say 10-12 funds they will charge £140-£164 to set it up – now look what that would cost if you were investing monthly !

    We have a client who was investing £50pm into 4 funds – he has started being charged £48 pe rmonth to invest the £50 per month.

  5. Anon 6.10.

    Interesting. I recently left a national firm of accountants as the national dictat was to place client investments in the limited expensive range of their own funds.

    This is no better than SJP.

    They are all ‘tied agents’ flying an independent flag. Their motive is to make money.

    Please FSA spend your time looking at this – its endemic with the larger ‘so called’ ifa’s.

    A true SIPP should only be for clients who need to access investments not accessable from a decent platform/ insured product. They should then be placed with a fee based SIPP provider who does not offer any funds.

    All other clients just need a USP functional contract with a very broad fund choice. There are a number of these available at very low cost!

    QED. Easy!

  6. Slow news day? This sort of thing has been known for years with some providers (decades if you look at SSAS). If you don’t like having to use insured funds, then no-one is forcing you to use those providers!

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