Self Invested Personal Pensions ripe for scammers

Consumer watchdog group Which? are concerned that rule changes to Self Invested Personal Pensions next April could create ideal conditions for scammers.

As of April 6 th, known in the industry as A-Day, workers will be able to invest in residential property and other alternative investments as part of their pension portfolio.

As mentioned before, investors will receive a tax relief on any assets put into their pension, so, for every hundred pounds a tax payer invests in his or her pension, the government will add an additional forty pounds.

The demand for Sipps is exceedingly high at present, which unfortunately could lead to the rise of unregulated property groups that will promote their products for the tax breaks gains offered, rather than for retirement benefits.

As Self Invested Pension Plans are unregulated, consumers will be unable to seek aid from the Financial Ombudsman or gain compensation if matters turn askew, leaving consumers as risk to mis-selling scandals.

Mick McAteer, a pension specialist with consumer group Which? said, "It's like watching a car crash happen in slow motion and being unable to do anything to stop it. All the conditions are there for mis-selling. There is a need for a bit of a public awareness campaign on this."

A spokesman for James Hay, the UK’s largest SIPP provider, agreed, adding, "The biggest area of concern is residential property. We've been contacted by between 50 and 70 companies in the last year wanting to sell their products to our SIPP clients and most of these we haven't heard of."

The UK Treasury are currently deciding on plans to regulate SIPPs, with the initial consultation period coming to a close at the end of the year.

In the meantime, both Which? and James Hay representatives announced the best way for consumers to invest in SIPPs is to do so for the right reasons, and not simply for tax avoidance measures.

Date: 16.10.05

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