After reviewing 19 SIPP providers, the Financial Conduct Authority has growing concerns about pension scheme money and assets managed by some firms.
The Financial Conduct Authority (FCA) regulates UK financial services firms and has found some firms do not fully understand their consumer duty obligations as a ‘distributor’ even though they are clear in their role as a ‘manufacturer’.
The Consumer Duty is a set of standards that financial services firms must meet to provide good customer outcomes. Under the consumer duty rules, SIPP providers are classed as both ‘manufacturers’ and ‘distributors’ as they sell a product when they grant rights under a personal pension scheme to a member.
It has recently been reported that in the review of 19 SIPP providers, the FCA said it had “growing concerns” about how some handle pension scheme money and assets.
The review revealed that companies relied on third parties, such as advisers, to ensure that client communications were clear and understood. It also noted that some firms still needed to implement the consumer duty for closed products and services, even though the deadline (31/07/2024) has now passed.
The FCA said:
“This is significant because of long-term fair value concerns for groups of consumers who do not need the flexibility of a full SIPP or who do not have a significant pension pot and are therefore unlikely to fall within the target market for this product.
“We will be engaging individually with firms who have not yet implemented a robust framework for all products under the duty and/or have not met the expectations set out in our recently published update mentioned above. Where standards have not been met, we will work proactively with these firms to ensure they are raised in line with our expectations.”
Concerns have been raised in relation to books and records for assets held for pension schemes and firms needing to maintain and update records properly. Trustee bank accounts have also been flagged, and firms are operating trustee bank accounts with inadequate control and oversight.
The FCA added:
“System and control weaknesses in these areas can mean consumers are provided incomplete or inaccurate valuations or statements of their pension, impairing their ability to make informed decisions and plan appropriately for retirement.
“In worst case examples, they can lead to shortfalls in pension scheme bank accounts, fraudulent payments being made from the pension scheme, and can also lead to significant delays in the orderly wind-down of a firm where its pension business is being transferred to a new operator.”
The FCA has stated it will conduct in-person visits to look at systems and controls within firms.
Mis-sold Self-Invested Personal Pension (SIPP)
+ −A Self-Invested Personal Pension (SIPP) is a “do-it-yourself” pension option, allowing you to combine a broader range of investments than most standard pensions. Many individuals find that SIPPs provide valuable flexibility in choosing the types and amounts of investments.
However, there have been cases where financial advisers have urged investors to transfer their funds into high-risk investments through SIPPs without fully explaining the potential risks involved. This lack of proper guidance has sometimes resulted in significant financial losses for those investors.
SIPP mis-selling occurs when financial advisers persuade pension holders to invest their money into a SIPP scheme that promises high returns from risky, unsuitable and sometimes unregulated investments.
FCA Data
- Although SIPP FOS cases have fallen from around 3,500 in 2019-20, there are still 800 open complaints, and some are more than two years old. The Financial Ombudsman (FOS) is a government-backed, free service that settles complaints between financial businesses and their customers.
- £184bn in assets are under administration across the SIPP market, compared to around £130bn in 2022.
- There has been an increase in assets under administration on platform-based SIPPs.
- Assets under administration within SIPPs reported by all firms (including platform-based SIPPs) now stand at £567bn for 5.3mn consumers.
- Non-standard (regarded as high risk) assets within all SIPPs now account for around 1.57% of the total assets under administration (compared to 2% in 2022)
- Most new non-standard assets have been in more secure asset types, such as unbreakable fixed-term deposits and NS&I products.
The FCA wants to see providers resolving complaints as quickly as possible. TLW Solicitors specialise in claiming SIPP compensation for those mis-sold a SIPP. We’ve helped many clients recover compensation after receiving unsuitable financial advice.
TLW Solicitors’ view
+ −Sarah Spruce, Legal Director at TLW Solicitors, said:
“These recent comments from the FCA are sadly not surprising, our specialist financial mis-selling team regularly helps clients who have lost out due to poor or unsuitable investment advice.
“If you or a loved one received advice from a financial adviser, financial planner or wealth manager and are worried about your pension investments, particularly if you have transferred them from a defined benefit, company or final salary pension scheme, then I encourage you to get in touch with our specialist pension mis-selling team for a no obligation discussion. We can take full details about your case and advise whether you may have the basis of a ‘no win, no fee’ refund claim.
“We have many years of experience in bringing successful cases on behalf of our clients. Even if the financial firm has gone out of business or been taken over, you may still be able to make a claim. These cases are often technically challenging and time-consuming, so it is important to have professionals in your corner to ensure that you recover what you are rightfully owed.”
Get in touch
+ −If you’re worried about your or a loved one’s SIPP investments, please call 0800 169 5925 email info@tlwsolicitors.co.uk or use one of our online forms below. Our team will contact you for an initial, no-obligation consultation to explore whether you may be eligible to make a ‘no-win, no-fee’ compensation claim.
It is important to get advice as soon as possible, as strict time limits can apply.
Minimum case values apply.
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