FSA concerns over Sipp sales

by Gill Montia

Story link: FSA concerns over Sipp sales

The Financial Services Authority (FSA) has raised concerns over the sale of self-invested personal pensions (Sipps), which are being recommended by some advisers when a stakeholder or personal pension would be more appropriate, and could possibly even be better value.

The Authority has found that financial advisers are recommending Sipps because they offer a wide fund choice and it is reminding those selling pensions that they should be able to demonstrate that a client actually needs that greater investment choice plus the flexibility and control offered by Sipps.

The regulator has also pointed out that Sipp providers operate a range of charging structures and advisers need to ensure that they “carry out proper cost comparisons with the alternative personal pension and stakeholder arrangements”.

Before the introduction of pension reforms in April 2006, there were an estimated 50,000 Sipp holders in the UK and that number has now increased to around 250,000.

The main difference between Sipps and personal pensions is the range of investment choices available.

Personal pension providers generally restrict investment options to their own range of managed funds but a growing number of providers now offer funds run by external managers.

With a Sipp, savers have more choice and control over the investment of their retirement funds.

The money can be held in unit trusts, investment trusts, individual shares, Open-Ended Investment Companies, UK gilts, corporate bonds, commercial property and cash deposits.