The FCA has today issued a timely alert on the subject of SIPPs.
In particular it has warned that transfers are taking place into SIPPs and then invested in unregulated investment schemes.
The FCA is concerned that the suitability of these investments has not been established for those clients who have been recommended a SIPP.
We have written on this subject before and, put bluntly, why go for an unregulated investment when there are so many regulated investment alternatives that are perfectly satisfactory?
Whilst there are of course unregulated investments that are going to be suitable, far too many are tainted by schemes that are tantamount to scams.
There have been far too many failures in this sector and too much money lost.
This regulatory warning follows an announcement today that 16 firms have been declared “in default” under the Financial Services Compensation Scheme (FSCS).
Included in the reasons for this level of failure is the fact that some of these firms sold unregulated investment products and subsequently have not been financially robust enough to pay claims made against them.
Whilst SIPPs remain a perfectly suitable pensions tax wrapper the regulator is quite correct to point out that the underlying investment funds also need to be suitable.
Sadly in many case they turn out not to be.
We think a healthy consumer warning is that “unregulated” should be code for “too risky”.
