Tag: SIPPs

ShareSoc Newsletters and SIPP Dangers

Another good newsletter issued by ShareSoc this month. Go here to sign up for it (you need to be a full member to get it): https://www.sharesoc.org/upgrade-to-save/

It covers yet another case where investors who hold funds in a SIPP may be prejudiced by an administrator charging fees to the SIPP funds. The latest case is that of Rowanmoor but the latest news on Hartley Pensions is also covered in the newsletter.

The moral is that you should only invest in a SIPP with a financially stable organisation and I suggest preferably one that is listed so you can easily monitor their financial stability – such as AJ Bell Youinvest or Hargreaves Lansdown.

The newsletter also covers the latest news for Woodford investors and the disappointing progress from the Digitisation Taskforce to improve the position of nominee shareholders – or at least make them no worse which is at high risk of happening if everyone is stuffed into a corporate nominee in the name of dematerialisation.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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FCA Challenges Cash Interest Charges

The Financial Conduct Authority (FCA) has published a letter sent to platform operators that manage ISA and SIPP funds. They say: “The amount of interest earned by some firms has increased as rates have risen. The FCA recently surveyed 42 firms and found the majority retain some of the interest earned on these cash balances, which may not reasonably reflect the cost to firms of managing the cash. Many also charge a fee to customers for the cash they hold, known as “double dipping”.

As both a customer of a well-known SIPP manager (AJ Bell) and a shareholder in the company that is hardly news to me. Interest on client cash holdings has been a major positive contributor to the profits of investment platforms as they typically pay less interest to the clients than they can obtain from depositing the cash in a bank.

At least that may be true now but a year or two back they were getting minimal interest on deposits and paying little or nothing to clients on their cash holdings.

The FCA seem to be saying that this source of profit is unreasonable and should not be used to cover more than basic operating costs but I am not sure that is entirely sensible. There are a lot of costs involved in operating an investment platform which have to be covered somehow. If not from the “cash margin” then what from?

The key issue is whether the charges applied are fair and apparent to customers, i.e. are they transparent and easily comparable across platforms? They certainly are not at present.

See the FCA announcement here:  https://www.fca.org.uk/news/press-releases/fca-writes-firms-about-treatment-retained-interest-customers-cash-balances

The AJ Bell share price has fallen by over 8% today at the time of writing.

Postscript: No doubt in response to the FCA announcement but probably under consideration for some time, AJ Bell have announced a reduction in charges and higher interest on cash deposits. See https://www.londonstockexchange.com/news-article/AJB/statement-re-pricing-changes/16249079

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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