On 4 November 2024 the FCA published a Dear CEO letter setting out a summary of its priorities, expectations and planned work in relation to SIPP operators. The FCA said that the letter should be read in conjunction with its May 2023 Dear CEO letter, published in the lead-up to Consumer Duty implementation. 

The key focus areas of this latest letter include:

Redress 

In the context of SIPP due diligence complaints, the FCA expects firms receiving a lead decision from FOS to take appropriate action under the Consumer Duty and resolve complaints as quickly as possible. The FCA’s work in the upcoming strategy cycle will continue to focus on redress being paid appropriately and promptly.  This is a clear message from the FCA that they will take enforcement action against firms and SMCR individuals if they fail to implement voluntary redress across their entire client book in line with FOS decisions.

The letter elsewhere notes that non-standard assets within all SIPPs now account for around 1.57% of the total assets under administration (compared to 2% in 2022) and that most new non-standard assets have been in more secure asset types.

Pension scheme money and assets

The FCA has concerns over firms:

• not operating trustee bank accounts with adequate controls and oversight, even where SIPP operators using a separate unauthorised trustee may be outside the scope of CASS 7; 
• failing to appropriately maintain and update books and records, particularly in relation to the scheme’s assets.

There should be adequate oversight from Senior Management Function holders and the FCA states that firms should consider ways to enhance the data collected and stored on underlying investments if appropriate. 

Consumer Duty 

The letter sets out a number of concerns following the FCA’s review of 19 SIPP operators, despite many of these firms taking significant steps to implement the Duty. The areas of ongoing concern include:

• misunderstanding of the dual role of SIPP operators as manufacturer and distributor;
• failing to specify target market at a sufficiently granular level;
• assessing fair value primarily through market comparisons;
• over-reliance on third parties (such as advisers) to ensure customer understanding; 
• inadequate implementation for closed products and services.

The FCA says that it will be engaging individually with firms who have not yet implemented a robust framework for all products under the Duty and/or have not met the expectations in its Price and Fair Value Good and Poor Practice update (which specifically mentions SIPP operators). 

Overall, despite some positive feedback, the letter strikes a warning note that the concerns set out in the May 2023 letter remain, as the FCA has not yet seen sufficient progress from all firms to address them. The FCA’s supervisory teams will be using information gained from its 2024 SIPP data request to increase its proactive engagement through firm visits. The portfolio therefore remains firmly within the FCA’s sights, with the letter also noting that total assets under administration within SIPPs reported by all firms now stands at £567bn for approximately 5.3m consumers.