SIPP operators have warned disclosing the interest they earn on investors' cash accounts is more complicated than FSA proposals suggest.
SIPP providers have welcomed the paper's aim for transparency, but warn the issue of disclosing interest is a complicated ‘red herring' which is less important than investors having a choice over cash accounts.
Richard Mattison, business development director at James Hay, says: "Disclosing that a provider earns interest on a bank account is fine. We already do that.
"However, the amount of interest earned can fluctuate and the amount the provider earns may not be directly linked to the amount of cash the underlying customer holds, meaning disclosure of a specific level of earnings is not possible."
John Moret, director of More To SIPPs, says: "The issue of bank interest retained on a commission is largely a red herring.
"The key issues are the underlying rate of interest received by the investor and the ability of the investor to choose an alternative bank."
The concerns have been raised as Defaqto figures reveal the average interest rate on a £50,000 deposit in a SIPP cash account has fallen since October last year.
Whilst the average interest rate earned on a £50,000 deposit in a SIPP cash account was 0.21% in October, it has now fallen to 0.20%.
"Reflecting the low base rate, interest rates on default SIPP cash accounts are low at the moment, even for large balances," says Matt Ward, wealth Management Consultant at Defaqto.
"Importantly, if advisers and clients do want to use cash accounts as part of their SIPP investment approach, they should shop around to try and find the best rates.
"It is important for SIPP investors to have clarity on the terms of associated bank accounts and the interest they can expect to accrue."
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