One of the UK's leading SIPP and pensions experts John Moret, still working part-time in the pensions sector in his seventies, has written a series of articles for Financial Planning Today reflecting on topics that have occupied him over the last 50-plus years. This is the fifth article in the series. Previous articles are available on Financial Planning Today by searching for 'john moret.'

After a rather long interlude and having some time ago entered my 76th year, this is my fifth article in a series for Financial Planning Today reflecting on current topics and those that have occupied me over the last 50 plus years of working in the pensions sector. 

Last week I attended the annual AMPs (Association of Member-Directed Pensions Schemes, the voice of the SIPP and SSAS sector) seminar drawn in part by the prospect of hearing from the FCA and FoS.

My interest was also sparked by the uncanny timing of a 'Dear CEO' letter from the FCA addressed to SIPP operators which was published the day before the seminar.

I was delighted to read the analysis of the SIPP market data set out in the dear CEO letter and confirmed at the meeting by Kate Tuckley the FCA’s Head of Consumer Investments.

The letter stated that the total SIPP assets under administration now stands at £567bn with approximately 5.3m consumers holding them. Some £184bn of assets sit with specialist SIPP providers, £204bn with investment platforms and, at the meeting, Kate suggested that the bulk of the remaining assets of £179bn were with life companies.

My delight was because for the first time the FCA figures broadly confirmed the data that I have been collecting for years.

I prepared a market report earlier this year and in this I subdivided the SIPP providers into 15 Platforms (£213bn) ,10 Life companies (£159bn),17 larger specialist SIPP providers (£110bn), 10 smaller specialist providers (£8bn) and 8 fintech/commodity SIPP providers (£10bn). In total my report said that the SIPP market had almost reached 2 milestones – with 5 million SIPP investors and £500bn of assets.

Previous market surveys and reports have consistently underestimated the size and value of the SIPP market so I was much encouraged that my figures and the latest FCA data are consistent and show the significance of the SIPP market. It now broadly represents 20% of the total UK pensions market assets - and nearly 40% of the DC pensions assets.

However, my delight was somewhat curtailed when Kate Tuckley confirmed that according to FCA data there are now just 51 active SIPP providers. My report covered 60 providers and while there have been some further SIPP provider failures since the report – most recently PSG SIPP – I suspect that the difference between the FCA data and mine may be down to the way different companies define SIPPs - and that some providers may have legacy books that are not actively marketed.

The number of providers has clearly reduced significantly over the last decade with at least 15 provider failures.

In their recent letter the FCA mentions the successful FOS defence of a judicial review and stated that they, “expect firms receiving an (adverse) lead decision from FOS to take appropriate action under the Consumer Duty to meet these obligations.”

The speaker from FOS said there were still over 500 outstanding SIPP complaints and there was no suggestion of any compromise regarding the decisions and determinations linked to these claims. So further SIPP provider failures cannot be ruled out.

I took some solace from the FCA’s comments at the meeting where they seemed keen to draw a line under the problems that the SIPP market has experienced previously and it would appear that the levels of regulator engagement with SIPP providers will increase which is to be welcomed. Had that level of engagement been present over the period 2010-2015 when most of the SIPP issues that have given rise to FOS claims occurred it is likely that the number of FOS claims and provider failures would have been a lot lower. That is not to say that there aren’t still problems.

At the meeting I drew attention to some other data from my report which showed that 2/3rds of SIPPs now operate on a non-advised basis and less than 20% of SIPPs have vested. That implies that there are over 3 million SIPP investors with over £300bn of assets that will face vesting their pensions without advice. This is a potential ticking timebomb for SIPP providers and I asked the FCA if they could provide any reassurance for providers that they will not face a tsunami of FOS claims as investors, whose funds have been depleted post-vesting, argue that the SIPP provider has a responsibility – in the same way that providers have been found accountable for investment due diligence failings.    

Again I was encouraged that the FCA appeared to be well aware of the issue although I was less convinced by the suggestion that the solution was likely to be part of the advice/guidance boundary clarification which is expected early next year. We will have to wait and see – hopefully for not too long. In the meantime there are a growing number of technology based solutions emerging although I am unsure that they alone will neutralise the timebomb!  

For now I would suggest that all providers give serious consideration to this latest 'Dear CEO' letter and take heed of the clear warning about the responsibility for ensuring that the FCA’s requirements and expectations are met. The FCA’s main concerns are clearly set out in the letter, particularly in relation to Consumer Duty obligations.

All SIPP providers regardless of size should by now have realised not only that these new obligations must be met – but that evidence to support this is essential.

The letter has an emphasis on the manufacture and distribution of products and price and fair value for customers but the other two consumer outcomes of understanding and support should not be overlooked. I would suggest that appropriately surveying customers on a regular basis is now a “no brainer.”

John Moret is principal of MoretoSIPPs consultancy and one of the UK's most experienced SIPPs experts, commentators and speakers. He has worked for Suffolk Life and several other SIPPs providers. He is chair of advisory business Intelligent Pensions and CX insight business Investor in Customers.

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www.moretosipps.co.uk