SIPP providers boost UCIS screening after FSA pressure

SIPP providers have increased their level of screening for poor or unsuitable investments within their schemes.

The move comes after the Financial Services Authority (FSA) inspected 70 firms via questionnaire, phone or site visit.

In a straw poll taken at the annual general meeting (AGM) of the Association of Member Directed Pension Schemes (AMPS), 55% of members said they had increased screening in the past year.

A further 9% said they had begun outsourcing the screening of investments made through their SIPPs in the last 12 months, whilst 36% said they had made no change.

The results come after several complaints to the Financial Ombudsman Service (FOS) claiming unsophisticated SIPP investors had been placed in unsuitable, high risk and illiquid investments, often unregulated collective investment schemes (UCIS).

The results of the poll compare favourably to those of last year's AGM. In October 2010, more than a sixth of SIPP providers said they did not understand FSA investment rules. A further 11% were unsure of whether they understood the FSA rules fully or not.

The 2010 poll also revealed uncertainty over who was responsible for ensuring only sophisticated investors put money into complex products through their SIPPs.

Around 6% of SIPP providers said they checked this themselves, a third asked IFAs if their clients were sophisticated, and 17% asked the investors themselves to confirm their sophisticate status.

Robert Graves, the outgoing chair of AMPS, said: "There is already regulation in place for UCIS. It is not possible for SIPP providers to determine how suitable all their investments are.

"That is the job of advisers and clients. Platforms are not expected to do this."

Graves added AMPS expects some negative feedback from the latest round of inspections.

However, he added: "If there are widespread failings, I would say it is the failure of the FSA to regulate the sector."