Suffolk Life has questioned whether the regulation of Self Invested Personal Pensions put in place by the Financial Services Authority earlier this month will achieve all its aims.
Speaking at a “Pension Evolution” conference, John Moret, director of sales and marketing at Suffolk Life, warned the full impact of Sipp regulation “has yet to be felt”, and suggested some existing operators had not given “sufficient consideration” to the impact of the new rules.
Moret says: “While the new regime has potentially opened up the marketplace to new operators there is little evidence of this having occurred to date."
Instead he says the new regime - which is based on the “package product” model - "appears to have encouraged some traditional life companies to market Sipps in a way which has little in common with the features on which the traditional successful Sipp model has been based”.
As he points out until regulation occurred the transparency of the fee based pricing model enabled advisers to add value by focusing on areas such as consolidating poorly performing legacy pension products under a Sipp wrapper, which benefited investors by allowing a “one stop view of their pensions wealth”.
In addition, Moret points out there are other issues with the new system of regulation, such as potential implications for operators holding client money, and the additional overhead costs for operators in complying with the new reporting requirements for HM Revenue & Customs (HMRC).
He also suggests existing Sipp operators may not have “given sufficient consideration to the impact of the cash and asset reconciliation requirements and the implications of outsourcing certain activities to third parties”.
And Moret argues in order to survive many Sipp operators will need a new approach - where “robust and scaleable technology platforms will be essential” - as he points out while the increased costs should mean higher prices, competitive forces are working in the opposite direction leading to reduced margins.
He adds: “Consolidation of operators over time seems inevitable. The move to greater individual ownership of pensions seems certain and the regulatory framework for Sipps needs to strike the right balance in treating investors fairly and ensuring a consistent approach to operational issues.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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