The Society of Pension Professionals (SPP), which represents more than 20,000 pension professionals, has called for stronger protection for consumers who use SIPPs (self invested personal pensions).
However, it has warned that better protection, as proposed by the FCA, could damage competition in the SIPP sector if it leads to “excessive compliance costs.”
Responding to an FCA consultation on proposed reforms to the self-invested personal pension (SIPP) market, the SPP says it supports the FCA's objective of stronger consumer protection and greater consistency across the SIPP market, provided the final regime is “proportionate, risk-based and practical.”
The SPP says it backs enhanced due diligence on higher-risk, unregulated, overseas and unusual third-party arrangements, but says firms should not be expected to duplicate the FCA’s existing supervision of authorised firms.
It wants the FCA to implement clear definitions, worked examples and greater alignment with existing regulatory frameworks to ensure firms can implement the new requirements “consistently.”
The SPP says it is particularly concerned that mandatory ‘look-through reporting’ (a deep investigation of underlying assets) could create a significant and disproportionate operational burden, especially for investments already subject to robust regulation.
A more targeted approach should focus on higher-risk assets, the body says.
The SPP says that SIPP operators should focus on legitimacy, ownership, administration, custody and safeguarding, rather than assessing whether an investment is suitable for an individual member.
The SPP is also calling for clearer expectations on valuations, audit, third-party data, record-keeping and monitoring, with flexibility for firms to use technology, exception reporting and risk-based sampling.
However, the SPP has also warned that that “excessive compliance costs” could contribute to reduced competition and narrower investment choice for consumers, undermining some of the FCA’s wider objectives.
Madalena Cain, deputy chair of the SPP Defined Contribution Committee, said: “The SPP supports the FCA’s ambition to strengthen consumer protection and bring greater consistency to the SIPP market, but the new regime must be proportionate and risk-based.
“We support stronger scrutiny of higher-risk investments and third parties, while avoiding duplication of existing FCA supervision. Clearer rules, practical guidance and a sensible implementation timetable will be critical. In particular, we believe the proposed look-through requirements could place significant and unnecessary burdens on firms where assets are already subject to robust regulation.
“The FCA should focus its most intensive requirements where the risks are greatest, giving firms enough time to implement the changes without driving unnecessary costs, consolidation or reduced investment choice for consumers.”
The SPP is the voice for a range of providers of advice and services to pension schemes, trustees and employers. Members include actuaries, lawyers, professional trustees, DC consultants, investment managers, providers, administrators, covenant assessors and other pension specialists. The SPP also has 90 corporate members who collectively employ more than 20,000 pension professionals.
• SPP response to the consultation: https://the-spp.co.uk/document/self-invested-personal-pensions/