Interactive Investor (III) - New SIPP charges coming soon

darren72

I've noticed on the III website that they are charging their SIPP pricing again.

http://www.iii.co.uk/sipp

It just states: "New SIPP Pricing - We will be announcing our new SIPP pricing soon."

Has anyone heard what these changes may be, and whether they are likely to be for the better or worse ?

I'm still in the process of having my investments transferred over (which was initiated back in February), so will be very disappointed if by the time the transfer is complete the fees increase.

Thanks

dunstonh

Generically, there is upward pricing pressure on SIPP providers. You need to have enough under management to break even and many are not profitable but having been pushing low prices to try and build the assets under management. There has been predictions for a few years now that we will see failures and mergers. Just 6 SIPP providers control more than two thirds of all SIPPs (FSA review in 2012).

SIPPs in the past have had lower regulatory requirements and lower client money rules. The FSA highlighted a number of issues in 2012 but the solution to those has not yet been presented. There is expectation of this in the next month or two. Capital Adequacy is one of the big ones. It will require firms to have strong enough financial backing to survive a selection of negative events. It is believed that the big SIPP providers are there but the small providers are not.

Going unbundled has also cost some SIPP providers that have been buying business (low charges, no profit but hope to build enough to get critical mass). The loss of trail and platform commission on legacy assets hits in April 2016. Some have prepared for that. Some have successfully moved fully with only a little disruption and with higher than industry normal charges. Some messed it up.

SIPPs have moved from being low risk (in the regulators eyes overall) to being higher risk. So regulation is increasing. The amount of financial crime taking place that uses SIPPs has increased and some SIPP providers have either run pension unlocking schemes or turned a blind eye to it and you have the prospect of large fines coming as well as significant redress amounts. It is no surprise to see SIPP providers calling for a permitted investments list.

Expectation is that some SIPP providers will be forced to limit their available investments.

The large ones will be fine. Those with the financial backing of a parent (insurance companies typically) will be fine. The smaller ones either need to find extra capital or shut down.

So, overall the pressures are upwards. However, that has been the case for a while and we are still seeing some drop their prices. It could be they have critical mass or it could be last ditch attempts to get it.

darren72

Thanks for your detailed and helpful reply - It is appreciated.