Gordon moots FSA control on Sipps |
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Sun, 02 Oct 2005 09:05
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LONDON: Pension schemes that promise the moon may be brought under the control of the Financial Services Authority. Chancellor of the exchequer Gordon Brown has hinted that he would want to bring the self-invested personal pensions (Sipps), which allowed high earners to buy second homes cheaply, under the same regulatory umbrella as all other personal schemes.
Gordon's views, outlined in a consulting paper, come in the wake of criticism of the marketing ploys adopted by property companies, offering even 40 per cent “discounts” on second homes.
A Treasury spokesperson said one of the options in the consultation will be to introduce a new Financial Services Authority-regulated activity of establishing and operating a pension scheme.
The new rules coming into force in April next allow people to invest their personal pension funds in property and set off some of the purchase cost against their tax bills.
The Treasury wants to create a new regulated activity of establishing, operating or winding up a pension scheme. This can be accomplished if non-occupational schemes, including Sipps, are brought under the purview of the FSA. The Treasury, however, suggests the regulation to be effective from 2007, whereas the new pension rules will be in place from April 2006.
The consulting paper moots that a licensing system would be in force allowing operators to handle personal pensions. The proposed changes, even as it puts an end to malpractices, would open up the pensions market and stimulate competition.
New pension rules, which come into effect next April, allow savers can obtain up to 40 per cent tax relief on residential property -- including holiday homes overseas -- bought for Sipps.
Gordon's views were not taken kindly by financial experts. The regulation plan, as suggested, could create a "gap year" when pension savings can be at risk, say some of them. An independent financial adviser and council member of the Association of IFAs, Michelle Cracknell, feared mis-selling in the gap year. People should seek expert opinion before they go into property investments that can be highly complex, she said. John Lawson, Pensions Manager from Standard Life, said estate agents marketing pension schemes are advertising property with a 40 per cent discount. That is effectively the tax relief on a pension. The advertisements are misleading, he added.
At present, there is no authorisation required to sell Sipps.
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