Written by Leonardo Robinson.
The FCA’s latest letter summarises its list of concerns with the SIPP industry. Although a first glance may suggest it is aimed at the full service providers, there is something for everyone. The themes it covers are all well-known now to the industry so this serves more as a roundup of the issues which are keeping the FCA awake at night. The breadth of issues covered indicates that there are a number of threads to its engagement with SIPP providers, with strong themes of consumer focus and provider resilience at its heart. These themes are aligned with key topics on which the Pensions Regulator is engaging with the occupational pensions side of the industry. Awareness of developments and guidance in other parts of the industry continues to be helpful across the board in light of the overlapping concerns of regulators.
With this in mind, here is a run through of the key messages:
Financial resources: as well as meeting the minimum capital requirement, firms should ensure they maintain adequate financial resources (principle 4).
Complaints handling: complaint handling should enable operators to identify recurring or systemic problems and to correct root causes where it is reasonable to do so. Where root cause issues are identified, consider whether it is appropriate to offer redress to customers in similar circumstances who have not yet complained.
Pension scams: if due diligence makes you aware of problems with an investment or introducer, the firm must take appropriate action in the best interest of the client. Reporting is encouraged.
Product governance: robust product governance must be put in place and products should be reviewed on an ongoing basis to ensure they are reaching their target market, and the needs of vulnerable consumers are met appropriately.
International SIPPs: the FCA’s view is that the tax benefits accessed by investing in an international SIPP are largely redundant to someone investing in a UK personal pension scheme. A bullet point list is given of measures for operators of international SIPPs who accept offshore investment bonds, not least being adequate due diligence on overseas advisory firms and investments.
Coronavirus and EU withdrawal: in the face of current challenges, the FCA expects operators to continue managing operational resilience risks so they deliver appropriate outcomes for their clients.
Firms can expect these areas to be the focus of supervision and engagement.
In recent years, several SIPP operators have entered insolvency because redress liabilities have crystallised, or because the costs of defending such claims exceeded their financial resources.