Recently there was a consumer programme on Radio 4 at lunchtime which reignited in my mind the need for a permitted investment list for SIPPs.
It was trailed as a programme about pension freedoms but in essence many of the stories were about how people had lost money by investing in ‘esoteric investments’ via their pensions or, as they proudly said, their SIPPs.

Of the cases covered, one had invested in store pods and another into a healthcare company that could no longer be traced. Why did they move their ‘safe’ investment into something that was not so safe? As it turned out, for the usual reasons – the search for greater ‘guaranteed’ growth and being convinced by smooth talking sales representatives.

This brought to mind a conversation with an adviser from just a few days before. He had been trying to contact a potential client for a decision only to find out that the person was in Cape Verde. He knew at that point that he would not advise that person – an investment had been mooted in a Cape Verde fund and the client had been flown there for a ‘due diligence visit’.

At the same time, the FCA is reportedly looking at what it deems to be high-risk investments held in SIPPs – specifically whether they should take action on a market with a rapidly increasing number of complaints. In the year to March 2017 the Financial Services Compensation Scheme received 3,565 complaints from consumers and paid out £105 million for these complaints.

It appears that the FCA has requested a range of information from SIPP operators looking at various ways of accessing such investments, such as:

• by an adviser
• execution-only or insistent client
• via an unregulated introducer
• direct, on a non-advised basis

It still strikes me that this is relatively easily avoided by a permitted list of regulated investments for SIPPS.

Most advisers will not recommend non-regulated investments but have to pay their part towards the FSCS levy for such investments. The word ‘unregulated’ means what it says – no comeback on default means it doesn’t make the list.

We often talk about ‘scams’ in pensions when the money is in the client’s bank but there are many other ways the word can be construed within the pensions world.

One area to keep an eye on is so-called ‘international SIPPs’, aka ‘QROPS’ but now using the trusted SIPP acronym to facilitate transfers offshore. I think we will read a lot more on this in the coming months.

Mike Morrison is head of platform technical, AJ Bell