SIPPs – the work and pensions committee asks some pointed questions of the FCA

31 May 2018. Published by Rachael Healey, Partner

The Work and Pensions Committee has sent a letter to the FCA following its review of defined benefit pension transfers raising 5 pointed questions in relation to SIPPs.

One of those questions is whether or not the FCA is considering the option of barring unregulated or non-standard investments from SIPPs altogether.  The disclosure of the letter, sent last week, coincides with the FOS' annual review showing a 37% increase in SIPP complaints for 2017/2018 compared to the previous year.


The Work and Pensions Committee has issued a letter to the FCA asking 5 questions.  The letter states that during the Committee's examination of defined benefit transfers "… it has become clear that SIPPs are the primary vehicle used by unscrupulous advisers to channel individuals' pension savings into unsuitable investments…" the letter also states that "… Although the FCA has warned SIPP providers about what it expects of them regarding due diligence, it is not clear what repercussions a provider faces if these expectations are not met.  Primary responsibility for paying compensation for mis-selling falls to the financial adviser, who can evade this by folding their firm…".


The 5 questions raised by the Committee of the FCA are:


  1. What is the value and proportion of funds transferred from DB pension schemes into SIPPs in the last two years which are held in the form of non-standard or unregulated investments?

  2. What due diligence are SIPP providers required to conduct on the investments that they provide access to and how does the FCA monitor this?

  3. What powers does the FCA have to punish SIPP providers for failure in due diligence, and how have these powers been used?

  4. In what circumstances can a SIPP provider be deemed liable to pay compensation to a customer whose funds ended up in an unsuitable investment scheme, rather than the financial adviser who arranged the investment?

  5. Is the FCA considering the option of barring unregulated or non-standard investments altogether from inclusion in SIPPs?


Those involved with complaints and claims against SIPP providers will be aware that these are some of the issues currently before the courts in Adams v Carey and the Berkeley Burke judicial review of a FOS decision from 2014. 


The disclosure of the Committee's letter coincides with the publication of FOS' annual review of complaints for the period 2017 and 2018.  The annual review provides that complaints in relation to SIPPs increased by 37% from 1,493 in 2016/2017 to 2,051 for 2017/2018.  The figures also indicate an 11% increase in complaints relating to pension transfers/opt outs with the number of complaints increasing from 496 to 553.


We anticipate that the headlines for SIPPs are not over yet and it will be interesting to see the FCA's response to the Committee's letter.

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