27 September 2007
The Financial Services Authority has voiced concerns that some
investors may be being sold self-invested personal pensions (SIPPs)
when simpler and cheaper plans such as a stakeholder or personal
pension could be more appropriate and better value. The FSA has
claimed that a thematic project they carried out suggested that
SIPPs are being recommended purely on the basis that they offer a
wider fund choice and not because of the Sipp's allowance of
self-selection of actual investment assets. The FSA said the review
indicated some potential problems regarding SIPP advice and urged
that advisers should be able to demonstrate that a client actually
needs the investment choice, flexibility and control of a SIPP
before recommending one.
The FSA said: 'Our review highlighted the potential risk that
Sipp recommendations may be based on access to a broader range of
packaged investment funds than under their previous arrangements,
rather than because the Sipp provides self-selection of actual
investment assets. Under these circumstances, a stakeholder pension
or personal pension may equally satisfy a customer's needs,
potentially at a lower cost. Sipp providers operate a variety of
charging structures and advisers need to ensure that they carry out
proper cost comparisons with the alternative personal pension and
stakeholder arrangements.'
Tom McPhail, an adviser with Hargreaves Lansdown, commented: 'I
have some sympathy with the FSA's sentiment as there will be some
advisers who may be incorrectly recommending Sipps. But I also
think the regulator's attitude is a little linear. It is not a case
of Sipps are all expensive but stakeholder pensions are cheap.'
The FSA began regulating SIPPs from the 6th of April 2007 this
year.
