Industry bodies have urged the Financial Conduct Authority (FCA) to provide greater clarity and avoid unnecessary regulatory complexity in its proposed reforms to self-invested personal pensions (SIPPs).

Responding to the FCA’s consultation, Adapting our rules for a changing market: self-invested personal pensions, both The Investing and Saving Alliance (TISA) and Personal Investment Management & Financial Advice Association (PIMFA) supported stronger due diligence and consumer protections, but warned that parts of the proposed framework could create unintended consequences or impose disproportionate burdens on firms.

PIMFA, responding on behalf of the UK Platform Group (UKPG), said that a number of the proposed due diligence requirements needed further clarification, particularly the level of proportionality expected of firms.

PIMFA senior policy adviser, Julia Sage-Bell, speaking on behalf of the UKPG, said: “First and foremost, the FCA must set out clear expectations of firms and establish how proportionate these checks have to be.

"This will allow firms to assess what resources they would need to deploy, and determine whether the proposals are realistic.”

PIMFA noted that this was especially a concern for legacy arrangements, warning that firms may have inherited assets or arrangements through acquisitions, in-specie transfers, or historic business models in which they have limited ability to change contractual terms.

It argued that the proposals could therefore have unintended consequences for consumers holding legacy assets.

Sage-Bell stressed that although the proposals expect firms to take reasonable steps to mitigate harm where due diligence requirements cannot be met, product or legislative restrictions could prevent firms from taking action in some cases.

She added that other interventions could result in consumer detriment through additional charges or taxation.

PIMFA also called on the FCA to consider how the new requirements would interact with existing Handbook provisions.

“In the spirit of streamlining, we believe the FCA should retain and refine the existing standard and non-standard asset classification, instead of introducing a further list of assets subject to core or additional due diligence,” Sage-Bell urged.

“This would encourage consistency, simplicity and automation, leading to better consumer outcomes over time.”

Meanwhile, TISA called for firms to have the option to operate under either the existing Client Assets (CASS) regime or the proposed new Pension Scheme Money and Assets (PSM&A) regime, with clear boundaries between the two.

TISA head of policy, products and long-term savings, Renny Biggins, explained: “Requiring firms to operate across two overlapping regimes could add significant cost and operational burden for firms without delivering a corresponding improvement in outcomes for customers.

“The FCA should create a clear route for firms to operate under a single regime, while ensuring CASS and the new PSM&A framework work consistently and complement each other where they interact.”

Biggins continued: “While we support the intention behind the due diligence rules to protect SIPP customers, firms should not be required to repeat checks or responsibilities that already sit elsewhere in the regulated distribution chain.

“The final rules need to be clear and proportionate so firms understand exactly what is expected of them. That will help deliver stronger consumer protection without unnecessarily increasing costs or restricting the range of SIPP products available to consumers.”

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