The SIPP Provider Group (SPG) is to lodge a formal response to the Department of Work and Pensions (DWP) following consultation on investment of protected rights, and its proposal to ban self-investment of protected rights within SIPPs.
Francis Moore, secretary of the Sipp Provider Group, says where some schemes with banks or building societies, acting as scheme provider, have been limited to cash deposits, other insurance companies have offered 'private funds' with wider investments, causing an unlevel playing field.
Moore says: "We will be calling on the DWP to allow protected rights to be held within a Sipp in one or more dedicated arrangements. We will also call on the DWP to allow investment in professionally managed investments such as unit and investment trusts; insurance company funds; or a discretionary investment account run by a professional investment manager.”
He says the SPG will also make mention of the cost-effectiveness of Sipps and the ability for members and advisers of being able to hold all pension assets in one pot instead of having protected rights split away from the main pension asset.
The SPG plans to lobby ministers, however, Moore says the general election, and the consultation period ending on 5 May, provides an added obstacle to ensuring this issue becomes a central focus.
The group is hoping to submit its paper next week, after meeting with the DWP at the beginning of the month.
On the issue of regulation, the Sipp Provider Group has called for a level playing field on regulation of registered pension schemes post A-Day as the majority of investments in Sipps are held with regulated entities including banks, investment managers, and stockbrokers, with the exception being commercial property.
Moore says previous meetings with the DWP confirmed sipps with a corporate trustee/administrator structure would continue to sit outside of the regulation but he believes the Treasury is considering the introduction of a new permitted activity 'Pension Scheme Operator', adding there has been no word from the Financial Services Authority from whom he expects consultation in advance for any new permitted activity.
Moore also warns of potential pitfalls in Sipp changes following A-Day as the market looks set to take-off.
As managing director for European Pensions Management, Moore says he expects commercial property to continue its path as a popular investment aided by the inclusion of residential property from A-Day.
But he cautions the maximum borrowing limits of 75% of the property value will be revised to 50% of the SIPP fund value, adding SPG lobbying for the existing permitted level of borrowing to be retained has not received favorable responses from either the Inland Revenue or the government.
“The SPG is also disappointed that temporary borrowing in relation to the reclaim of VAT has not been included on top of the 50% limit, repeating the issue that arose when the SIPP investment regulations were introduced under SI 2001/117," he adds
Moore advises people to buy property close to A-Day to ensure they have sufficient time to complete their purchase, as lower borrowing limits will be strictly enforced from that date throwing funding issues into the mix.
He adds: “The new limits may also restrict members from transferring from one registered pension scheme to another where they have outstanding borrowing from a pre A Day property purchase that exceeds 50% of their fund.”
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Joined as head of strategy, multi asset, in June
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