FCA warns SIPP operators over Consumer Duty

The FCA has warned SIPP operators over lack of progress over concerns that their actions could lead to “harm to individual consumers.” In Dear CEO letter sent yesterday, the regulator said it hadn’t seen “sufficient progress” from operators to address concerns it had raised in a May 2023 letter. The new letter from Lucy Castledine, FCA director of consumer investments, said in particular there hasn’t been sufficient progress on redress payments being made to consumers for due diligence failings. The letter said: “We have growing concerns about the handling of pension scheme money and assets by some firms, and the accuracy of firms’ books and records. We also have some feedback for firms on their implementation of the Consumer Duty.” “We expect firms receiving a lead decision from FOS to take appropriate action under the Consumer Duty to meet these obligations and resolve complaints as quickly as possible.” It reported that there remain 800 open complaints from a high point of around 3,500 in 2019-20, but some of the cases are now more than 24 months old, and could be “resolved informally.” The letter reminded SIPP operators that they are manufacturers and distributors under the Consumer Duty. It said that all firms understood their role as manufacturer, but many remained unclear about their obligations as distributors under the Consumer Duty. It said: “SIPP operators are distributors under the Consumer Duty because they sell a product when they grant rights under a personal pension scheme to a member.” But it warned that some firms have not specified the target market for their products at a sufficiently granular level. It also said some firms were too reliant on third parties, such as advisers, to ensure their communications were understood by retail clients. It said some firms had not adequately implemented the Consumer Duty for closed products and services, despite the 31 July deadline having passed. It warned firms: “Where standards have not been met, we will work proactively with these firms to ensure they are raised in line with our expectations.” The letter revealed analysis of this year’s SIPPs data request to firms. The regulator said initial analysis of the data provided showed that the total level of assets under administration across the SIPP operator portfolio is now £184bn, up from around £130bn in 2022. It said there has also been an increase in assets under administration on platform-based SIPPs supervised in the FCA’s platforms portfolio, which now amounts to £204bn. The total assets under administration within SIPPs reported by all firms now stands at £567bn, for approximately 5.3m consumers. Non-standard assets within all SIPPs now account for around 1.57% of the total assets under administration, compared to 2% in 2022. It said that most new non-standard assets have been in more secure asset types, such as unbreakable fixed term deposits and National Savings & Investments products, with approximately 66% of newly invested non-standard assets in these asset classes, compared to 17% in 2022. The FCA said it will use the data to identify any outlier firms and those that may not be sufficiently resourced, which pose a potential risk to the wider market or consumers. It warned firms that if “standards are not at the levels expected, we will take any necessary supervisory action.”

FCA warns SIPP operators over Consumer Duty

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