HM Revenue & Customs (HMRC) should reinstate the use of a permitted investment list across the pensions industry to protect the end consumer from further scandals, according to London & Colonial (L&C).
It said the list should cover self-invested personal pensions (SIPPs), small self-administered schemes (SSAS) and qualifying recognised overseas pension schemes (QROPS).
L&C itself is operating under its own permitted investment list and admitted it had already turned away business because of it.
Head of business and product development Adam Wrench said it would be necessary for the Financial Conduct Authority, The Pensions Regulator and HMRC to work together to implement such a list.
He said: "We have a moral duty to protect investors' money so that it is ultimately used to provide an income for life rather than be gambled away. As such, there's a real need for greater clarity around what is a permitted and non-permitted investment.
"SIPP providers receive numerous requests from investment firms to sign off on their investment, placing the onus on the provider to carry out due diligence.
"Obviously, one consideration is whether the investment is a UCIS and what sort of client it would be suitable for. There are some investments that clearly fall foul of the UCIS rules but there are others which fall into a grey area."
L&C said it went back to the pre-pension simplification permitted investment list as a starting point for its own new version.
It includes all the standard main regulated asset classes, in addition non-standard investments such as UK commercial property and loans.
The firm said it had aimed to clearly define these as much as possible to remove elements of doubt.
For example, commercial property is defined as UK-based property being used as a trading premises.
Wrench said this move would "take the SIPP industry back to its roots and its original target market for SME business owners".
He added: "At present, SIPPs are regulated and providers must therefore supply ongoing reports to the FCA on the type and quality of business being accepted. However, SSAS providers are unregulated, allowing them to more freely accept investments at face value.
"We favour a two pronged approach of tighter regulation for SSAS as well as a permitted list that is rolled out across all schemes. Without greater joined up thinking, we as an industry are just setting ourselves up for a fall further down the line."
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