The FSA has stepped up its attack on unregulated collective investment scheme (Ucis) sales and raised concerns about Ucis sold within a Sipp.
Speaking at an FSA investment managers and private equity event in Canary Wharf recently, the regulator’s head of savings and investments Linda Woodall said, in some cases, IFAs have told customers to remortgage their houses and put the money in Ucis.
“The firms involved did not consider, or explain, the implication of costs and charges of the recommended Ucis”
She warned that others have placed clients in Ucis within high-charging Sipps when they are not the most appropriate vehicle.
Woodall said this lack of concern about the products being recommended “poses a reputational risk to both the IFA and asset management sectors”. She said 131 Ucis files were reviewed by the regulator in the summer and in 58 of the files advisers recommended their customers invest or transfer existing pensions into a Ucis within a Sipp.
She said: “To make it worse, the firms involved did not consider, or explain, the implication of costs and charges of the recommended Ucis, and, in a number of cases, it was not evident that a Sipp was the most appropriate vehicle for the customer’s pension need.” (article continues below)
Woodall said that typical Sipp charges can include an 8% initial charge, a 2% annual management charge, a £500 up-front administration charge, a 5.9% transfer penalty and fees of 5.6%. She said: “These are significant costs and should be explained to the customer.”
In August last year, the FSA told 11 firms to stop promoting the products and warned that providers were using aggressive sales techniques, such as offering trips abroad and high commission.