SIPP providers offering protected rights should be given the chance to operate on a level playing field, urges Suffolk Life.
In its response to the Government’s consultation on protected rights, which closed last Friday, the SIPP provider highlights insurance-based specialist SIPP operators will generally have greater solvency requirement than trust-based SIPP operators under the proposals.
John Moret, director of sales and marketing at Suffolk Life, says the Government should change the draft legislation so any SIPP operator prepared to accept protected rights funds should meet the same capital requirement in respect of its funds as life assurers. He says they should also pay comparable fees to the FSA.
“Historically the Government has been more concerned about the risk of default on the part of the provider of SIPPs rather than with risks posed by poor investment performance," he says.
"We believe it is entirely reasonable to require a higher level of investor protection of protected rights given that the source of those rights is either partially or totally a rebate as a result of contracting out of the state second pension.”
Moret believes a case also exists for restricting the investments allowed for protected rights to those permitted for linked life insurance funds. He says this restriction should reduce the threat that investing in higher risk products could lead to losing protected rights benefits.
Standard Life agrees with Suffolk Life that the Government should remove the inconsistencies in the benefit provisions between protected and non-protected rights, including the prohibition on the phased purchase of annuities that apply to protected rights.
It says: “Removing all distinctions between protected rights and non-protected rights would greatly simplify pensions by removing complex terms and conditions which are difficult to understand. It will also make pensions easier, and cheaper, to administer. For example, people won't get two different pension pots shown on their annual statement.”
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