The term “self invested” was something of a misnomer as the majority of SIPPs have always been operated on an advised basis. However that should not detract from the “raison d’etre” for SIPPs as originally outlined by Nigel Lawson – which was to allow those with personal pensions “more choice in relation to where their contributions were invested.” With the mists of time the original thinking behind SIPPs is often overlooked.
In 1989 the idea of “self investment” was not exactly new. Small Self Administered Schemes had been around since the late seventies and a number of insurance companies offered a “private fund” option with their personal pensions (and previously their retirement annuity policies) which allowed wider investment subject to the restrictions imposed by the linked life regulations. Indeed Suffolk Life Annuities had been set up in 1975 with this very much in mind.
However 1990 saw the first SIPPs launched and although there is some debate over who established the first SIPP I think credit should be given to Francis Moore who at the time was at Personal Pension Management Limited (PPML) - which was owned by Guinness Mahon although PPML was subsequently sold to Provident Life (which became Winterthur Life).
It was a tough struggle for many years convincing advisers and their clients of the merits of SIPPs. Even after 10 years there were only 50,000 SIPPs. Today there are around 2 million with total assets of £300bn. Pensions simplification in 2006, the growing use of income drawdown, the emergence and growth of investment platforms and the pension freedom changes have been the major drivers of growth –which year on year remains at an impressive 15% p.a.
It’s interesting that during the period up to pensions simplification (A-day) SIPPs were subject to investment restrictions imposed initially by an HMRC list of “permitted investments” which subsequently were enshrined in regulations. There was no other regulatory regime and yet there was no abuse and scams were largely unheard of. The freedoms allowed through pensions simplification changed all that –and the regulatory regime introduced a year later has been shown to be largely ineffective.
I’ll look further at why I believe the regulatory regime failed in a future article. For now we can only reflect on the somewhat extraordinary developments as a result of the long-running saga of Berkeley Burke and FOS – and also ponder on why it has taken so long for the judgment in the Carey Pensions case to be published – it’s now over a year since the 5 day hearing concluded.
There are several other substantial legal claims that potentially may come to court in the coming months – and the judgment in the Careys case may provide some clear pointers as to the likelihood of these claims succeeding. It should not be assumed that it is only the smaller SIPP operators that are affected. I have it on good authority that some larger providers including some investment platforms are watching uneasily as the SIPP “mis-selling” claims unwind. Watch this space!
John Moret is principal of MoretoSIPPs consultancy and one of the UK's most experienced SIPPs experts, commentators and speakers. He has worked for Suffolk Life and several other SIPPs providers.
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