Increased regulatory pressure on SIPPs could be forcing investors into SSAS and QROPs
03/06/2013 | Download PDF
Continuing scrutiny and increased regulatory pressure on SIPPs could be forcing investors into SSAS and QROPs in order to access more inviting investment options, warns London & Colonial’s Adam Wrench.
“The FCA and HMRC have had SIPP, SIPP providers and financial advisers alike all under the magnifying glass for a number of years now, in such areas as increased disclosure requirements; new requirements for pre and post sale illustrations; UCIS, and more recently capital adequacy; as well as transparency around any retained bank account interest - just to name but a few. While the FCA may feel that they are having some success in “shutting the front door” the problem is that there are two gaping back doors that still remain wide open in the form of SSAS and QROPS. In addition, the increased workload required in order to comply with the FCA's new disclosure requirements, not to mention those associated with Capital Adequacy, will ultimately lead to an increase in the costs associated with SIPPs, which in turn will result in an un-even playing field when compared to SSAS and QROPS.
SSASs and QROPS remain, for all intents and purposes, untouched in terms of the areas mentioned above, with the main reason being that neither of these schemes is currently regulated by the FCA. We do not believe that the FCA should, or indeed will want to, regulate SSASs; however even if they wanted to they would still be unable to regulate QROPS, as these schemes are based outside of the UK.
Therefore the danger is that the FCA’s objectives of protecting against potential client detriment, in relation to UK residents and UK pension funds, will not be achieved by simply focusing narrowly upon regulation of the SIPP market. What we as an industry do not want to see, is providers and advisers suggesting to their clients that the best way to bypass the FCA’s rules on SIPPS is to transfer into a QROPS or a SSAS. The catalyst for this could very well be an increase in SIPP fees once the additional regulatory burden starts to bite, and at the same time that QROPS and SSAS fees start to become more competitive. London & Colonial is active in the SIPP, SSAS and QROPS market and our suggestion is that the industry needs to undertake some joined up thinking…
While we understand that the FCA will not want to regulate SSASs, what HMRC could do is to insist that the Scheme Administrator be a regulated entity. For example, as the rules currently stand a director of a company could establish and register a SSAS as a registered pension scheme with HMRC. That same director could also be a scheme member as well as the scheme administrator. However, if HMRC insisted that the scheme administrator was a regulated firm, in the same way as it does for SIPPs, then any disclosure and reporting requirements that the FCA put in place for SIPP providers could also be extended to SSAS Scheme Administrators.
In terms of QROPS, the extended reporting requirements recently introduced for QROPS scheme managers could have taken into account similar disclosure requirements, as are currently in place for SIPP providers where the underlying clients are UK residents.
Clarity and a consistent approach across all self-investment pension options will lead to greater confidence amongst investors that their pension choice will not only be suitable for the long-term, but also for the right reasons.”
Adam is Head of Product and Business Development at London & Colonial.
Notes to Editors
About London & Colonial
London & Colonial specialises in self-invested products for both UK residents and persons resident overseas.
The London & Colonial Group includes
(1) London & Colonial Holdings Limited – UK parent company
(2) London & Colonial Services Limited which is regulated by the UK Financial Services Authority and operates SIPPs and SSASs
(3) London & Colonial Assurance PLC which is regulated by the Gibraltar Financial Services Commission (matching UK standards) and which offers Open Annuities, QROP Annuities and Open Offshore Bonds
(4) L&C (Administration Services 2) Limited and London & Colonial (Trustee Services) Limited which are both based in Gibraltar and offer the EU SIPP.