City Trustees - part of Mattioli Woods

News and Media

24 July 2014

City Trustees responds to FCA SIPP warning

Self-invested personal pension schemes have been acclaimed as the leading success story for the last decade with double-digit growth rates. However, closer inspection sadly reveals, yet again, more industry-wide mis-selling and malpractice.

The FCA has for some time been concerned about the SIPP industry. In 2009, it carried out an in-depth review of SIPP providers, resulting in the publication of its Thematic Review of the SIPP Sector. More recently, it conducted a further review and sadly, the FCA's findings indicated that the industry had made little progress. It highlighted inadequate risk processes, poor quality management information, an increase in the number of non-standard investments held by some SIPP operators (often with poor monitoring) and inadequate due diligence being undertaken for introducers and investments.

This week, the FCA sent a warning letter to all SIPP operators. The FCA states that its review has found that a significant number of SIPP operators are failing to comply with capital requirements and undertake adequate due diligence in relation to investment by SIPPs in "non-standard" investments, despite previous communications from the FCA on this issue. The FCA has already taken enforcement action against some firms and it intends to visit more operators in the coming months.


The FCA's letter is clearly intended as a warning to SIPP operators and an indication that it will be increasingly willing to take enforcement action against non-compliant SIPP operators.

City Trustees welcomes a higher level of regulation for SIPP providers. Providers are trusted with clients assets and they should take that responsibility seriously.

Mark Smith, Group Operations Director and Compliance Officer, commented:

"SIPP providers should make sure that they carry out due diligence on assets they accept and calls for an HMRC permitted investments list does not bypass that necessity. It should not be difficult to have a strong compliance culture and structure in place to protect clients' assets".

"Capital adequacy should take the form of a risk-based approach with providers reviewing their business, making an assessment and holding the appropriate levels of capital within their business based on that risk assessment. Higher levels of capital are appropriate for any modern 21st century financial services business".

Ed Carey, Managing Director of City Trustees, added:

"Our belief is that the question of investment suitability is paramount. As a provider, we would not wish to restrict the flexibility of SIPPs as they are wonderfully flexible vehicles in which to develop long-term pension strategies and are sometimes appropriate for certain clients to make direct investments, including own-use business property. However, it is evident that the industry seems incapable of regulating itself appropriately in failing to respond to the FCA's concerns and therefore a higher level of regulation seems appropriate".


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