FCA warns SIPP operator CEOs over redress and governance

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The Financial Conduct Authority (FCA) has written to operators of Self Invested Pension Plans (SIPPs) to warn them it will be visiting them to ensure they remedy flaws in their processes.

In a Dear CEO SIPP letter published this week, FCA director of consumer investments Lucy Castledine stated SIPP operators, who together now administer around £184 billion, have been too slow in responding to concerns the regulator raised previously.

Chief among these are seemingly unsatisfactory levels of redress given to clients who complain about the way they are treated. As of November there were around 800 open complaints regarding SIPPs with the Financial Ombudsman Service (FOS). 

Castledine wrote: “Some of these cases are now over 24 months old, and in our view are capable of being resolved informally based on either ‘lead’ or published Decisions from the FOS.”

The FOS database indicates complaints in recent years involving SIPP providers have involved the full spectrum of firms. These range from smaller operators all the way to the UK’s largest investment platforms AJ Bell and Hargreaves Lansdown.

Problems with governance and records

The letter also highlighted the FCA’s increasing concern over matters such as the handling of pension scheme money and assets, poor record-keeping and the implementation of its new Consumer Duty framework at certain firms.

“We have growing concerns that some firms have not been operating trustee bank accounts with adequate controls and oversight,” it said.

“We are also concerned that some firms’ books and records, particularly in relation to the assets being held for the pension scheme, are not being appropriately maintained and updated.”

The regulator believes there are problems with the way some SIPP operators are interpreting Consumer Duty. It emphasised that SIPP operators are distributors as well as manufacturers, and so are obliged to maintain, operate and review product distribution arrangements.

This includes ensuring the needs, characteristics, and objectives of the clients they target are taken into account. 

The regulator noted that its supervisory teams will draw on data it gathered earlier this year to “increase our proactive engagement with firms through a rolling series of visits over the next year”.

These visits are intended to “ensure the expectations set out in this letter and the May 2023 letter are being met in full”.

The data suggests UK SIPP operators now hold £184 billion in assets under administration, compared to around £130bn in 2022.

When including investment platforms total assets under administration reported by all firms now stands at £567bn, for approximately 5.3m consumers.

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