Pressure up on SIPP Interest Turn

Published: 25 Nov 2016

- 23 per cent of advisers believe “interest turn” should be banned completely – up from 13 per cent just six months ago

- A further 66% believe it should be disclosed in line with FCA guidance

- Transparency becoming even more important ahead of the introduction of next month’s capital adequacy requirements

- Momentum Pensions believes providers should be absorbing capital adequacy costs and not passing on to investors

Research from Momentum Pensions (1) shows the number of advisers who want an outright ban on SIPP providers earning money from retained interest charges in projections and reduction in yield calculations – the so-called “interest turn” from SIPP cash accounts – has almost doubled in the last six months.

The results show that 23% of advisers want a ban on the practice, compared to just 13% when the same research was carried out six months ago (2). In addition, 66% of advisers feel it should be disclosed in line with Financial Conduct Authority guidance to enable comparisons to be made.

The transparency debate is becoming even more important as the FCA’s capital adequacy rules come into force in less than a month’s time on 1 September which base solvency requirements on the proportion of standard and non-standard assets held by SIPP providers. A proposal by the FCA in CP15/30 states that SIPP providers should be obliged to disclose retained interest charges in projections and reduction in yield calculations, which in turn follows heated debate about the lack of transparency and the overall legitimacy of taking this interest turn.

Momentum Pensions, the growing international pension specialist and independent pension trustee, also points out that an important aspect of this transparency is to ensure SIPP providers are meeting associated capital requirements charges themselves – and should not be expecting investors to pay extra levies to cover the costs.

Stewart Davies, CEO of Momentum Pensions, said: “In the last six months we have seen the number of advisers calling for a ban on the payment of the so-called interest turn double – highlighting just what a problem it has become. Advisers are scrutinising SIPP providers more than ever before ahead of the introduction of the capital adequacy rules next month, and there is simply no room for anything other than complete openness and transparency.

“Additionally, an important aspect of this transparency is for SIPP providers to meet associated costs of meeting these regulations themselves. It is completely wrong to pass on any associated charges to investors, and advisers have the right to be reassured that their clients won’t be expected to meet these costs at all.”

When it comes to related transparency and regulatory issues, further research from Momentum Pensions shows that 77% of advisers are looking for providers that have strong corporate governance systems in place.

It also shows that 64% want more clarity from the FCA or HMRC on non-standard investments, and 42% want specific clarity on peer-to-peer investments.

 

  1. Research conducted by independent researchers Pollright among 106 financial advisers specialising in retirement planning between June 6th and 9th using an online methodology
  2. Research conducted by independent researchers Pollright among 101 financial advisers specialising in retirement planning between January 12th and 21st using an online methodology

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