Scam pension investments may soon go on an industry blacklist as self-invested pension plan firms try to clean up the market.
Pressure from the UK Serious Fraud Office (SFO) and pension regulators has already led some providers to start listing their own scam alerts.
The move is aimed at closing a gap in SiPP pension regulation that covers pension providers but not the investments within the fund.
The SFO has concerns that SIPP trustee companies are not regulated by The Pensions Regulator or the Financial Services Authority (FSA), provoking the SiPP provider trade body the Association of Member-Directed Pension Schemes (AMPS) to float the idea of a central blacklist of dodgy investments.
Scammers bypass regulators by offering expensive, poor performing or fraudulent investments for inclusion in self-invested pensions, like SiPPs and QROPS. Investors hand over cash from their fund and are often left holding a worthless asset.
Illegal investment promotion
AMPS Chairman Andrew Roberts said: “While bona fide SiPP operators could accommodate regulation of their bare trustee companies, this would not stop fraud within the investment fund, which seems to be the real area of concern.
“The regulatory bodies should tackle the root of the problem and not seek to tarnish all SiPP providers because of failed investments, illegal promotion of unregulated collective investment schemes (UCIS) or isolated instances of fraud.”
The AMPS has spoken out against government imposition of stricter financial regulation with a simple challenge.
“At some point we should simply leave it to the SiPP operator to decide how to run their business and the consumer to choose whether they want a SiPP operator with higher charges and better controls or lower charges and fewer controls,” said Roberts.
Protection from scammers
“The government and opposition have pressed for pension charges to be controlled yet this is at odds with introducing more regulatory requirements that leaves the industry facing rising costs.”
Now, Roberts indicates that SiPP providers are keen to look at an industry wide blacklist of rip-off investments – like UCIS, carbon credit trading, tropical hardwood plantations and land banking.
Speaking at a recent conference, he revealed the industry was determined to protect pension funds from scammers.
“It can be used in listing what will and will not be allowed when advisers and clients are doing their own due diligence on investments,” he said.
“It’s a good interim measure if those investments fail later, but there are a large number of investments to look at, meaning it could turn out to be a costly service.”