Vantis, the AIM-listed Business Advisory, Tax and Accountancy firm, is rejecting warnings from some IFAs that Sipps could be the subject of the next mis-selling scandal, claiming instead that investors have bought into them sometimes in spite of advice that they are not the right vehicle. The company claims the determination of some people to invest in Sipps, in the face of recommendations to the contrary, is more a case of mis-buying than of mis-selling.
Sipp rules were changed from 6 April last year – known as ‘A-Day’ – when eight separate pensions regimes were streamlined into a single set of rules. Steve Harvey, Director of Vantis Financial Management, points out: ‘‘We have been approached by a number of people who think they want a Sipp because that’s what they’ve read about in the press. They like the idea of managing their own pension investments, but fail to take into account the associated costs and whether the potential benefits merit the sometimes high outlay.’’ In fact Sipps had been around for some 16 years prior to A-Day but the hype of pensions simplification brought them to the fore – with a lot of providers jumping on the bandwagon to supply a product the market seemed to be clamouring for. The pull, it seems, has come as much from investors as from providers pushing their products at the risk of mis-selling.
Harvey continues, ‘‘Sipps can be costly to set up, with high annual charges, and are really only of interest to people who want to devote time to managing their own financial affairs. There are huge numbers of investors out there paying into a Sipp, for whom it's a completely inappropriate product. And in many cases, it’s no one’s fault but their own.’’
Regulation of Sipps under the Financial Services and Markets Act will come into effect from April 2007 and the market has already reacted with the number of providers thinning out over the previous 12 months, from over 150 to more like 100. Harvey welcomes the move, saying: ‘‘The financial services industry in general has suffered damage to its reputation as a result of earlier mis-selling scandals. Tighter regulation is only to be welcomed if it protects people from any such danger. However in this case, I believe some individuals are themselves to blame for ill-advised investments.’’
Harvey concludes: ‘‘For may investors, a simple stakeholder pension is perfectly adequate. For others, a SASS may be a better suited investment vehicle. I'd urge all investors to seek regular advice and review from a genuinely independent financial adviser, and above all, heed their recommendations before leaping into a costly and perhaps ineffective investment.''
For further information, please contact Steve Harvey of a member of our Financial Management team.