Worries about dodgy investments and fraud have led to a call from pension firms for a crack down on unregulated self invested personal pensions (SiPP).
The move follows the Serious Fraud Office expressing concerns about the risks of retirement savers losing money to unregulated SiPP trustee companies.
While most pension and investment firms are supervised by the Financial Services Authority or the Pensions Regulator, SiPP trustees are free from the same financial management controls.
The Association of Member Directed Pension Schemes (AMPS) wants regulators to deal with the marketing of unregulated investments rather than increase the bureaucracy for SiPP schemes.
AMPS chairman Andrew Roberts said: “While bona fide SIPP operators could accommodate regulation of their bare trustee companies, this would not stop fraud being committed 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 UCIS or isolated instances of fraud.”
The FSA has already issued a warning about unregulated collective investment schemes (UCIS).
A collective investment scheme is a ‘pooled investment’, which is a fund that several people contribute to. A fund manager will invest the pooled money in one or more types of asset, such as stocks, bonds or property.
Unregulated funds promising high returns put money in to more risky investments, like film production, forestry plantations and foreign property.
“The industry is already faced with rising costs as a result of proposed changes to illustrations, better information flow to investors, higher FSCS levies from regulated investment fund collapses, improved due diligence of underlying investments and, of course, there is the expectation that providers will have to hold higher levels of capital reserves,” said Roberts.
“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.”