'Loan buddy' warning for SIPP providers

Author: Fiona Murphy
Retirement Planner | 03 Apr 2012 | 15:29

Categories: Pensions

Topics: Association of Member-Directed Pension Schemes (AMPS)


SIPP providers are being increasingly targeted for “loan buddy” business, a prime vehicle for pension leakage, warns Andrew Roberts, chairman of Association of Member Directed Pension Schemes (AMPS.)

A "loan buddy" is where two loosely connected parties lend to one another in tandem through their SIPPs.

Roberts said: "You have to treat it with a pinch of salt if the loan is going to be unsecured and ask why is one [SIPP investor] lending to one and the other lending to the other."

At the last AMPS workshop held in February, 28% of 100 SIPP specialists revealed their firms had been approached by people wanting to use SIPPs for this purpose. Barnett Waddingham, where Roberts is currently partner, has also recently refused such proposals.

Roberts revealed that IFAs have been directly asking whether it is possible to set up two SIPPs for separate individuals to enable the loan business, which is not in the spirit of authorised SIPP investment.

"It sounds like they're lending from their own SIPP to themselves and even if they pay the money back with interest, [lending to yourself] that's not a directly allowable investment. And [the loan] could default [resulting in] pension leakage" he said.

Providers could easily turn down loan buddy business from an IFA wanting to set up two SIPPs under their firm, but in the scenario that an adviser sets up separate SIPPs under different providers, it would be more difficult to spot.

SIPP providers dealing with individuals wanting to invest in unsecured loans should be vigilant. Roberts says: "So there's a warning for SIPP providers, should you be lending to people on an unsecured basis? The rules allow it, but is it something you should be allowing in your SIPP product?"

FSA, The Pensions Regulator and HMRC issued warnings in February over an increase in early release pension offers.

More from retirement planner

Related briefings

Recommended reading



  • Comments
  • Print
  • RSS
  • Share
blog comments powered by Disqus

Related articles

Most Read

Audio / Visual

Coffee Lounge

Who picked up the gongs this year?

Protected Product Review Awards 2013

Who picked up the gongs this year?

Advisers and providers gathered at the Grand Connaught Rooms in London on 20 November to celebrate the ingenuity and the graft displayed in the protected product arena throughout the last 12 months. These awards are growing in popularity every year, and our congratulations go to the winners and highly commended.


event logo

Retirement Planner Forum & Awards 2014

06 Jun 2014 - 06 Jun 2014

London, UK

event logo

International Fund & Product Awards 2014

16 Jun 2014 - 16 Jun 2014

London, UK

event logo

COVER Breakfast Briefings

26 Jun 2014 - 26 Jun 2014

London, UK


Sponsored video


Do you believe the insurance industry can deliver the Chancellor's "retirement advice for all" pledge?