Just over a year since the UK regulator elected not to ban them, the use of non-standard assets in self-invested personal pensions (Sipps) has been questioned by financial advisers.
Global financial services consultant CoreData surveyed 992 IFAs and found 49% think Sipp providers should not allow these types of investments.
This is double the proportion that said they should be allowed (24%), as 27% are undecided on the issue.
Furthermore, 78% said they want the introduction of a list of prohibited Sipp investments, while 59% said recent Sipp court cases have made them more cautious about nonstandard/high risk investments.
In July 2018, the FCA said it was not considering barring unregulated or non-standard investments from inclusion in Sipps, even though it admitted having concerns about scams.
Recent issues
This report comes a few months after Sipp provider GPC Sipp went into administration.
The firm came under fire for placing clients’ pensions in high risk and non-standard investments which ended up becoming illiquid.
It has since been bought by Hartley Pensions for an undisclosed sum.
Responsiblity
CoreData’s survey also found that seven-in-10 advisers believe they should ultimately be responsible for ensuring Sipp investments are suitable.
Some 22% think providers should be responsible and just 8% feel end investors should bear responsibility.
Nearly two-thirds (62%) said consumers should not be able to purchase Sipps without taking advice.
Just under half (47%) think Sipps are only suitable for experienced/sophisticated investors.
“The study shows that while advisers are approaching Sipps with a sense of caution, they assign themselves a high degree of responsibility when it comes to protecting clients from bad outcomes and ensuring Sipp investments are suitable,” said Craig Phillips, head of international at CoreData Research.
Reputation
Despite the caution over non-standard investments, two-thirds (65%) of advisers said the Sipp market has been unfairly tarnished by a small number of problem cases.
But they do not think the damage to the Sipp’s reputation is irreversible — only 13% said the Sipp brand has been permanently damaged.
The majority of IFAs (75%) said the full Sipp will survive, compared to just 3% who disagree and 22% who are undecided.
But a similar proportion (76%) think the number of providers will decrease over the next few years.
Only 4% expect an increase in the number of providers and 20% think the number will stay about the same.
International Adviser recently spoke to Murray Smith, group managing director at wealth manager Mattioli Woods, who said the growing number of problem cases emerging in the Sipp market could be a “game changer” for the whole industry.
