Six questions to ask if your SIPP provider is bought

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Consolidation in the self-invested personal pensions (SIPP) industry is continuing to heat up ahead of looming regulatory requirements which are expected to pile pressure on smaller providers.
Six questions to ask if your SIPP provider is bought

This week’s news that James Hay Partnership is to acquire Capita’s SIPP book for an undisclosed sum follows on the heels of other deals between Dentons and RSM Tenon and Suffolk Life and Origen Investment Services.

The regulatory uncertainty surrounds new capital adequacy rules set to be unveiled by the Financial Conduct Authority (FCA) later this year. It is anticipated the FCA will increase the amount of capital SIPP providers must have to protect against any financial difficulties they may experience.

Such consolidation mean people who take a DIY approach to managing their pensions may find themselves with a new SIPP operator.

While firms say assets will be transferred with as little disruption to the customer as possible, there are a number of questions people should ask their new firm.

Here, David Fox, director of sales and marketing at SIPP provider Dentons, suggests five:

• Who are the new firm and are they profitable?

It is important to have a SIPP provider that is financially strong and can invest in the best technology and staff. So check how long it has been profitable and if it is able to invest in systems, staff and the business to maintain its service levels and continue to grow the business. It is also important to ensure it can meet any future regulatory requirements such as the upcoming capital adequacy proposals.

If not, you may be left with a provider that offers quite a restricted SIPP in terms of service and asset classes allowed.

• Does the new firm provide the services and technical expertise required both now and in the future for your needs?

It is important to have a SIPP provider that has the technical knowledge and expertise to look after and administer any assets that you wish to hold.

• Are SIPPs core to the new firm or is there a chance they may be acquired themselves?

SIPPs are very popular and some firms see this as a way to make money quickly. So it is important that SIPPs are core and do not just sit alongside their main activity. You don’t want to end up moving again.

• Does the new firm have the ability to take this new book of business on?

Service is so important to the smooth running of your SIPP so you need a firm that is able to take on the new business quickly and with the minimum of fuss.

• Will there be new terms or fees which may cost you more?

As you may be signing a new agreement, check that the new terms and fees are what you expect and that the fees cannot be increased at short notice. Some SIPP firms charge fees annually in advance and again it is important to be able to move providers if you wish to and not be tied in.

• What are the penalties if I decide to move to another SIPP provider?

Many SIPP providers have exit penalties that mean that you have to pay a large administration fee to move to another provider. This is even the case if you have had poor service or issues with them. These fees can run into several hundreds of pounds and might be a significant barrier to you leaving meaning you have to stick with a scheme you are not happy with.

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