Picking the right Sipp provider is no easy task. Service can be a sticking point for many advisers. But how do different operators make sure they are doing the right thing by their clients?
In the run up to September 2016, each firm will need to meet the new capital adequacy requirements. Advisers will be focusing on due diligence of a company and how suitable it is for their clients.
In July last year, the FCA published a thematic review into enhanced transfer values and Sipp operators. The review came with a warning to advisers after it found poor advice was given in a number of cases.
Later in the year, the long-awaited confirmation of the capital adequacy requirements was announced.
The new requirements come at a time when the popularity of Sipps is increasing by the year. Each quarter, Sipp operators must submit data to the FCA to show the number of Sipps sold during that time period. The regulator will also occasionally publish the information for the public, but the last, Retail Investments Product Sales Data Trend Report, was from August 2012. Information received by Suffolk Life from the FCA shows the number of Sipps set up has increased dramatically since then.
Chart 1 shows the number of Sipps set up has in fact soared since Q4 2012 from roughly 50,000 to between 150,000 and 200,000 per quarter. In 2014, the numbers seem to have waned. Chris Jones, strategic partnerships director at Suffolk Life, says, “I wouldn’t give too much credence to the latest quarter’s figures. We’ve seen the FCA frequently revise recent data and some of those revisions have been quite hefty.”
He believes the increase in number can be put down to the RDR, which came into effect on 31 December 2012. Particularly in Q4 of 2012, people were gearing up for the RDR and making a switch to platforms.
“All the market feedback is that Sipps – and platform Sipps in particular – are very buoyant and Sipps are the natural home for investors wanting to take full advantage of the new pension freedoms,” he adds.
The FCA numbers show there are 95 firms still actively selling Sipps; three years ago there were 110. The reason for this could be consolidation. Roughly 20 books have been taken over in the last three years, and with the publication of the FCA’s third Sipp thematic review, capital adequacy requirements and the “Dear CEO” letter, many have pointed to the pressures on smaller providers and the likelihood of firms withdrawing from the market. However, the FCA statistics do not yet show this as the case.
It is clear that Sipps are growing in popularity, but in order to keep that up, service must now play a large part in an operator’s proposition.
Table 1 covers Sipp complaint data, looking at how many formal complaints were made, how many were upheld and how much compensation was paid out in the 12 months to 31 December 2014. Data is taken from the Money Management Sipp survey results, which covers a total 51 providers and 71 plans, although just 19 plans returned information about their Sipp complaints.
