The Financial Conduct Authority has launched a consultation aimed at improving standards in the SIPP market, amid concern of cases of poor due diligence.
The consultation paper ‘Adapting our rules for a changing market: self-invested personal pensions’ sets out the regulator’s plans to drive greater consistency of standards in the SIPP market, while maintaining the flexibility and broad investment choice they offer.
The FCA said that while most SIPP providers are “already doing the right thing”, there have been cases of poor due diligence, weak record keeping and gaps in how firms protect money and assets.
Charlotte Clark, director of cross-cutting policy and strategy at the FCA, said: “SIPPs provide consumers with flexibility and choice. Many firms are doing the right thing, but we want to help consumers invest with greater confidence by ensuring standards are consistent.”
The FCA said that while it had seen improvements in firms’ due diligence following the introduction of Consumer Duty, the high-level nature of the existing rules has led to differing interpretations by some firms about the extent and scope of due diligence required, noting “inconsistent application and approaches” that do not meet its expectations.
As a result, the FCA said more explicit handbook rules would support more consistent and effective due diligence standards across firms in the sector.
Additionally, the FCA is proposing stronger requirements for the handling of pension scheme money and assets. It said the “targeted and proportionate” proposals reduce the risk of consumer harm when firms fail or wind down.
Ben Kumar, head of strategy – wealth, public policy and investment at 7IM, said: “We think that bringing SIPP due diligence and care of customer assets into a common framework is a brilliant idea. Pension saving is one of the most important investments people ever make, and more comfort that assets are properly looked after is a good thing – it would only take a couple of high profile issues for people to stop trusting the pension system, whether SIPP or otherwise.”
Maurice Titley, commercial director of data and dashboards at Lumera, also welcomed the announcement.
“The FCA’s proposals should help provide greater clarity and consistency across the SIPP market, reinforcing standards that support both consumer protection and confidence.
“As SIPPs continue to grow in popularity, driven by consumers seeking greater control and flexibility over their retirement savings, it is essential that governance, due diligence and asset protection frameworks keep pace with that growth.
“Achieving this will require strong data governance, efficient operational processes and technology that enables firms to manage increasingly complex requirements without compromising service.”
