At the AMPS 2014 conference, there was a decent session at the end when the audience of largely SIPP providers was asked whether the Government should issue a list of investments that SIPP providers can allow pension savers to hold in their SIPPs. This contrasts with the current situation where legislation simply taxes investments that Government don’t want pension savers to use tax-relieved savings for – such as residential property.
The majority – about 80% I think – thought there should be a list. We then listened to Robert Graves (or Rowanmoor, but not speaking on their behalf) arguing why there shouldn’t be a permitted list, followed by Mike Morrison of AJ Bell arguing why a list is needed. The audience was then polled again, and were split 50/50. I guess this highlights the problem – there are decent arguments for and against.
Here are the key points:
A permitted investment list would allow SIPPs to be simpler products to explain and with fewer variations would allow simpler comparison and allow legislators (or regulators) the ability to ban certain investment types that it is not comfortable being used for tax-relieved savings. The demand for the list has been prompted by widespread use of UCIS and close substitutes within SIPPs and subsequent interference by the regulator to stop UCIS ending up in SIPPs.
There are a few arguments against having a list: how would the list be compiled, would providers have any greater certainty given the confusion over what funds are classified as UCIS for example (with some investment providers taking FCA to court over the issue), there is an effective black list at present anyway such as for residential property, and of course how do you introduce a list which might include investment types already held by some SIPPs.
I’m a bit of a floating voter on this issue. I often favour a more expansive black list (i.e. a list of non-permitted investments) based on the current legislative structure. So the rules that “ban” residential property would be expanded to ban other types of investment. This however doesn’t help the consumer, and so I am inclined to look at a permitted list, perhaps looking at merging pension and ISA rules whereby the pension list is the same as the ISA list plus some extras such as commercial property.
But it struck me at the AMPS conference that perhaps a good way would be for the industry to come up with its own voluntary permitted investment list, and providers can sign up to that voluntary arrangement or ignore it as they see fit. A voluntary code could be introduced relatively swiftly – many providers operate their own version of a permitted investment list often with different limits on esoteric investments. A voluntary code could also deal with the pluto problem (“is it or is it not a UCIS?”) neatly as there would be no huge drama if a provider had misunderstood the category of investment.
So I support a voluntary code for SIPP providers to sign up to. This could be extended to SSAS as well, though with SSAS it is the member trustees rather than the pension providers that ultimately decide.