Transparency in the SIPP Industry

Published: 25 Nov 2016

Transparency in the retirement planning sector is no longer a nice-to-have; it is a must-have.

We are all aware of the problems that have beset the financial industry in recent years. The best way to ensure the problems do not return is to do all we can to help the pensions industry remain open to scrutiny at all times, with no hidden fees and complete transparency among providers.

However, Momentum Pensions’ own research has revealed a concerning trend within the SIPP sector which illustrates there is still a lot of work to be done.

A lack of clarity with fees

Out study highlights that well over half (55%) of advisers say they have experienced instances where a SIPP provider has levied charged they were not expecting, leaving them “shocked”.

It also reveals that nearly three quarters of advisers (74%) admit they find it difficult to easily compare between the charging structures of different SIPP providers.

The concerns about charging and being able to compare effectively are uniting advisers in support for further Financial Conduct Authority action – 94% of advisers who responded say they would back action to require all SIPP providers to publish charging structures in a standard format.

When it comes to related transparency and regulatory issues, further research shows that 77% of advisers are looking for providers that have strong corporate governance systems in place, 64% want more clarity from the FCA or HMRC on non-standard investments, and 42% want specific clarity on peer-to-peer investments.

The message is transparently clear. Independent financial advisers pride themselves on providing a clear, transparent service to their clients. We, as providers, need to ensure they can expect the same service from us.


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’ own recent research, carried out in the run-up to the capital adequacy deadline date of September 1st, showed that  23% of advisers want a total ban on the practice, compared to just 13% when we carried out the same research six months earlier.

In addition, 66% of advisers feel interest turn should be disclosed in line with FCA guidance to enable comparisons to be made.

In line with these advisers, many SIPP operators want it banned too, feeling that taking this additional income cannot be justified in any way. However, there are some providers who don’t see anything wrong with taking this money, as long as the trail is properly disclosed and doesn’t disadvantage the client beyond the standard terms they could have obtained directly.

However – for the good of a completely transparent industry, with no room for confusion whatsoever, providers need to take a specific stance and stick to it. With so many advisers against the practice, it is clear what the industry as a whole thinks to it.

The scale of the issue is a large one. Last year’s FCA consultation paper on pensions said the SIPP industry earns around £60m a year from retained interest charges – which are not being included in projections, effects of charges tables and reductions in yields.

Some research papers have even gone as far as claiming that SIPP providers are relying so heavily on the money they make from retained interest charges that they will actually fold if the practice is stopped.

On average, 10% to 12% of SIPP assets are held in cash accounts, according to the FCA.

In conclusion

Transparency, regulation and strong governance are by-words that should characterise the SIPP sector.

Quite simply, advisers should be 100 per cent sure that providers are giving them the tools they can work with to give their end client a fully transparent service. Our research has revealed a number of concerning facts, showing that the industry has some way to go to prove it can deliver such a service to advisers.

Those providers who fall short need to make changes now – not just for their own reputation and standing, but for the good of the SIPP industry as a whole.


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