SIPP reforms risk information overload for savers

Industry bodies have urged the Financial Conduct Authority (FCA) to provide greater clarity and avoid unnecessary regulatory complexity in its proposed reforms to self-invested personal pensions (SIPPs). Responding to the consultation, both The Investing and Saving Alliance (TISA) and Personal Investment Management & Financial Advice Association (PIMFA) supported stronger due diligence and consumer protections, but warned that parts of the proposed framework could create unintended consequences or impose disproportionate burdens on firms.

Proportionality concerns for legacy assets

PIMFA, responding on behalf of the UK Platform Group (UKPG), said that a number of the proposed due diligence requirements needed further clarification, particularly the level of proportionality expected of firms. The group noted that this was especially a concern for legacy arrangements, warning that firms may have inherited assets or arrangements through acquisitions, in-specie transfers, or historic business models in which they have limited ability to change contractual terms.

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Senior policy adviser Julia Sage-Bell stressed that although the proposals expect firms to take reasonable steps to mitigate harm where due diligence requirements cannot be met, product or legislative restrictions could prevent firms from taking action in some cases. She added that other interventions could result in consumer detriment through additional charges or taxation.

The proposals could therefore have unintended consequences for consumers holding legacy assets. If the FCA does not clarify these boundaries, firms might be forced into a position where they cannot meet the new standards, yet are still penalized for failing to do so. This creates a difficult environment for firms managing older portfolios that simply cannot be updated to meet modern compliance standards.

Streamlining asset classifications

PIMFA also called on the FCA to consider how the new requirements would interact with existing Handbook provisions. “In the spirit of streamlining, we believe the FCA should retain and refine the existing standard and non-standard asset classification, instead of introducing a further list of assets subject to core or additional due diligence,” Sage-Bell urged. “This would encourage consistency, simplicity and automation, leading to better consumer outcomes over time.”

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TISA called for firms to have the option to operate under either the existing Client Assets (CASS) regime or the proposed new Pension Scheme Money and Assets (PSM&A) regime, with clear boundaries between the two. Renny Biggins, head of policy, products and long-term savings at TISA, explained: “Requiring firms to operate across two overlapping regimes could add significant cost and operational burden for firms without delivering a corresponding improvement in outcomes for customers.”

Biggins continued: “The FCA should create a clear route for firms to operate under a single regime, while ensuring CASS and the new PSM&A framework work consistently and complement each other where they interact. While we support the intention behind the due diligence rules to protect SIPP customers, firms should not be required to repeat checks or responsibilities that already sit elsewhere in the regulated distribution chain.”