We need to talk about SIPPs

The Financial Ombudsman Service (FOS) has reported a near 50% increase in the number of complaints that they have received from consumers about Self Invested Personal Pensions (SIPPs).

About 75% of those complaints were to do with the fact that the underlying investment of the SIPP was in an unregulated collective investment scheme (UCIS).

We have written about this subject before.

Some UCIS products are borderline scams with the chance of actually getting anything back from the investment seemingly much lower that the risk of losing your money!

It is almost as if the investor is putting a match to a pile of banknotes.

The words “greed” and “scam” sound harsh but we are struggling to understand why sensible people are allowing themselves to be talked into buying these things. And that is probably the problem.

It seems to us that some (and they are we believe really the minority) advisers are trying to be too clever and possibly too greedy themselves in recommending an UCIS when a mainstream regulated investment fund will deliver exactly what the investor needs.

But let me repeat the vast majority of advisers will protect their clients against this approach.

So SIPPs will get something of a bad name when in fact they can be very sound products indeed.

If you are recommended a SIPP ask why that is the recommendation. But don’t just ask about the SIPP because that is simply the tax wrapper.

Ask probing questions about the recommended underlying investment funds and do not proceed unless you  receive a compelling and logical answer.

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