- AJ Bell welcomes FCA proposals to introduce new due diligence rules and a new regime for Pension Scheme Money & Assets (PSMA), in its response to CP26/20 on SIPP governance – with the consultation closing today
- However, the company warns that the final rules need refining to better reflect the intended outcomes whilst recognising existing regulatory protections
- The FCA wants to strengthen consumer protection after finding weaknesses at some firms, including poor due diligence, weak controls over trustee bank accounts and patchy record keeping
- The regulator acknowledges that the new rules could drive some SIPP providers or investment managers out of the market, leaving clients without a provider or fewer investment options
- Advisers need to feel confident that SIPP providers they choose have the operational capability, financial strength, robust governance and experience to protect client interests without compromising service
Mark Rendle, AJ Bell advised managing director, comments:
“The whirlwind of change for SIPP providers is showing no sign of slowing down, and over the next few years pensions are facing a packed agenda of regulatory and legislative change, from introducing inheritance tax on unused pension funds, new disclosure rules and a new Value for Money framework.
“Although the FCA’s overall goal makes sense – after all, it’s fundamental that SIPP customers’ pension money is protected – the actual rules need some refining to make sure they better reflect that ultimate objective. The final framework should be proportionate, practical to implement and focused on the risks the FCA is aiming to address.
“Responsibility for compliance should reflect the activities each regulated firm carries out and the permissions it holds. SIPP operators should remain responsible for properly checking, managing and overseeing the third parties they work with. Otherwise, there is a danger that in their current state, the rules could prove unnecessary, duplicating work in some areas and only adding another layer of needless prescription.
“Getting the rules right is important as the consequences could be serious. The FCA itself acknowledges that the proposals could drive some firms out of the SIPP market, leaving clients without a provider.
“This is a classic ‘sledgehammer to crack a nut’ response. Client security is a goal worth striving for, but the FCA should continue its work to regulate ‘bad actor’ firms without overloading all SIPP firms with disproportionate new rules and reducing choice for clients.
The importance of good administration
“These discussions can easily slip into the weeds of client money protection (CASS) checks, reconciliations and technical compliance. But they underline a much bigger point: good SIPP administration is highly specialised, increasingly complex and fundamental to delivering good client outcomes.
“SIPPs have come a long way in the last few years. Stronger FCA oversight and the investment providers have made in governance, systems and controls means SIPPs are a secure and flexible retirement planning vehicle.
“But the growing regulatory burden also highlights an important responsibility for advisers. Choosing a SIPP is not simply about investment functionality or price. It is about selecting a provider with the operational capability to manage increasingly demanding administration, the financial strength and governance to remain robust through further regulatory change, and the experience to protect clients’ interests without compromising service.
“As the pension landscape becomes ever more complex, advisers will want to partner with firms that have the scale, resilience and expertise to navigate that complexity, while continuing to put advisers and their clients first.”
How did we get here?
In December 2024, the FCA published a discussion paper exploring whether the pensions regulatory framework needs updating as the UK moves further towards defined contribution pensions.
The FCA tackled three different areas:
- Tools and modellers – the FCA suggested new rules were needed for pension projections shown on tools and modellers. They followed this up with a consultation published late last year (CP25/39) and we expect the final rules later this year.
- Pension transfers – the FCA was concerned about the length of time pension transfers took. Despite this, in their consultation paper (CP39/25) they suggested new rules for non-advised pension transfers that only threatened to create additional paperwork and delays. AJ Bell responded by asking the FCA to think again on its ‘anti-consumer’ pension transfer plans.
- SIPPs – the final area of the discussion paper questioned whether new regulations were needed to keep pace with the variety of different SIPP business models. AJ Bell’s view was that it must be clear what harm any new rules were trying to prevent, and that they must be proportionate to the problem.
