Elaine Turtle: FCA DB scrutiny hits SIPP market

There has been a flurry of corporate results in the last few months from SIPP providers that have shown an increase in revenue due to the increase in SIPPs being set up due to the large number of DB transfers to SIPPs. Most SIPP providers are now expecting a slow down in the number of SIPPs being set up with a DB transfers. This got me thinking, given the introduction of pension freedoms and the desire by many reaching retirement to find a tax efficient way to pass on their wealth down the generations, wouldn’t you expect it to be increasing, not decreasing? The reality is that the FCA’s scrutiny of the DB transfer market has had and continues to have an impact on the market. Many adviser firms have had their permissions revoked, or they have voluntarily given them up to work with the FCA to ensure they have more robust processes and that all the documentation is in place. This means that there has been a severe reduction in the number of firms able to provide advice to clients or indeed that are willing to take on the extra regulatory and administrative burden for what may not be a great deal of profit for them. This advice is needed as most SIPP providers will not accept a DB transfer unless there has been a positive recommendation for the transfer to happen.There is also the sad fact that there have been cases where transfers have taken place and they have been unsuitable or facilitated by unscrupulous scammers who simply steal the money. Then the question of what the impact of the new rules issued by the FCA on improving the quality of pension transfer advice has? They set out how advice should be given to consumers where there are safeguarded benefits and include raising qualification levels for pension transfer specialists, guidance on and the initial conversations with potential clients), a requirement for firms to provide a suitability report regardless of the outcome of the advice. So more change that could see even more advisers leaving this area of the market.In reality, the SIPP sector is simply evolving, new business for many firms is still strong and the reliance on DB transfers was a short term increase and we are now back to a more normal playing field. The sector will continue to grow with the polarisation continuing, with the bespoke products at one end and the simple SIPPs at the other. Recent research has suggested that SIPP market is estimated to grow by £1.9bn a year up to 2020 according to GlobalData.It is likely that as the DB transfer market matures and advisers and their clients look to take advantage of pension freedoms, the majority of these transfers will go into the simple SIPP end of the market and the bespoke end will be used to accumulate wealth – investing in some of the more interesting assets such as commercial property.Elaine Turtle, Director, DP Pensions

Elaine Turtle: FCA DB scrutiny hits SIPP market

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