Moret Blog: Can 1.1m Sippholders be wrong?

"Oh no, here we go again!" is a message I can hear reverberating around the board rooms of Sipp operators following the FCA's announcement that hot on the heels of its new guide for Sipp operators they plan another thematic review. This will be the third time in under six years that the regulator has conducted a review of this type into the operation of Sipps. That's in addition to a request in April this year for operators to provide a significant amount of data and management information and the mandatory attendance of all Sipp operators at FCA workshops at the end of 2012. And, of course, the FCA has delayed publication of the new capital requirements for Sipp operators.One could be forgiven for believing that this is an industry in crisis – and yet recent data I have compiled shows that there are close to 1.1 million Sipps in existence with total assets of around £130billion. There is a debate to be had about just how many of these are "true" Sipps but the fact is that this market continues to grow at a rate of over 15% per annum – despite the damage potentially caused by the fraudulent or ill-advised investment schemes that have tarnished the Sipp brand. Clearly for those investors caught up in these schemes there is the real prospect of consumer detriment. However the numbers involved appear to be small although not insignificant. It is certainly hard to believe that the recent FCA announcement is solely related to these schemes.{desktop}{/desktop}{mobile}{/mobile}What seems clear is that the FCA remains concerned about the standards of conduct exhibited by some Sipp operators. The FCA is very clear that even where business is introduced via an adviser or planner the client is a customer of the Sipp operator for regulatory purposes. That imposes particular demands on the management of the Sipp operator. One can have some sympathy with the FCA view although in some areas, such as the client money and custody rules, I believe the precise application of the rules regarding the operation of Sipps remains uncertain.However, there is a bigger picture which is all about the effectiveness of the current Sipp regulatory regime. Last year I did some 'back of the envelope' calculations and worked out that the cost to Sipp operators of meeting just the FCA / FSA's regulatory regime across the industry was probably in excess of £100 million per annum. Put another way that's over £100 per annum per client. It's against that backcloth that I argue that the current regime – including the HMRC rules – is not fit for purpose and is not acting in the best interests of the majority of Sipp investors. I believe the FCA and HMRC should get round the table with representatives from across the Sipp industry with the aim of designing a new regulatory regime which both meets the needs and protects the interests of investors – but in a cost-effective way which is proportionate and reflective of the risks involved.John Moret - often known by fellow professionals as 'Mr Sipp' - has worked in the pensions and Sipp sectors for over 40 years for a number of leading providers and is a founder of the consultancy 'MoretoSipps'

Moret Blog: Can 1.1m Sippholders be wrong?

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