Calls for a return of the "permitted investment list" for self-invested pensions (SIPPs, SSASs and QROPSs) continue.
During my time on the AMPS committee, this topic came up many times with the split result that some in the industry viewing it as a necessary step to move beyond current problems, with others highlighting that it would be a backward step.
At present, there are restrictions of various kinds on investments allowed within other tax-incentivised wrappers such as ISAs, VCTs and EISs so it could be seen as an anomaly that self-invested pensions operate on a different basis.
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The current system, of course, imposes a tax framework around investment choices which helps dictate what providers will allow, with SIPP operators having the added pleasure of constructing products which deliver good consumer outcomes across the board and so may be more restrictive than, say, SSASs.
The way the current legislation works, therefore, is to have categories of investments that are not tax-advantageous and therefore discourage their use. Examples include being a member of a Property Investment LLP, investing in most kinds of residential property or purchasing "pride-in-possession" type articles such as cars, yachts and wine.
To switch to a finite list of permitted investments would be a switch around and could, I imagine, involve quite a serious re-write of the pension rules. Perhaps this is best reserved for when there is a radical pension overhaul.
In the meantime, a swifter resolution to the issues at hand would be to expand the "taxable property" legislation that introduced the penal tax charges to residential property, yachts et al to include investment types of concern to HMRC. The public would be best served if this extension came hand in hand with some specific practical guidance from HMRC. The "non-permitted investment list" wouldn't be as efficient in policing investments as a "permitted list" but seems an achievable step that could find favour with both sides of the "permitted list" camps if done sensibly.
As with most pension changes though, the most complex technical issues will relate to transitional cases: those investors who have already invested in asset types that might not make the permitted investment list, or would become taxable property if the alternative approach is adopted. The industry has been there before (several times), of course, and so this is achievable.
But after saying all of the above, the only question that really matters is what asset types would be deemed no longer acceptable? And if the industry truly believes there are not appropriate, then perhaps sorting it out ourselves will be the best solution.
Andrew Roberts, Partner, Barnett Waddingham LLP
@andrewddroberts
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Andrew Roberts blog: Industry in need of a unanimous investment decision
