Self Invested Personal Pension Schemes (SIPPS)

Self-Invested Personal Pensions (SIPPS) were introduced by the Finance Act 1989. They are a form of personal pension which allows the individual pension holder to decide how the contributions are invested, subject to HMRC requirements and any restrictions in the rules of the scheme. In recognition of the role that the member plays in investment decisions, SIPPS were, historically, subject to stricter regulation of investment than other types of pensions schemes.

The Labour Government introduced a new pension tax regime under the Finance Act 2004. The intention was to replace the eight different tax regimes with a single set of rules applying across pension schemes. The initial intention was to have a common set of investment rules, which would have meant enabling SIPPS to invest in assets previously prohibited, such works of art, fine wine and residential property. However, in the December Pre-Budget Budget Report published in December 2005, the Chancellor announced that to prevent potential abuse, SIPPS would not after all be able to invest in residential property and other high value personal chattels. In the 2013 Budget, the current Government said it would explore whether the conversion of unused space in commercial properties in high streets and town centres to residential use could be encouraged by amending Investment Regulated Pensions Schemes rules.

In October 2012, the Financial Services Authority published the results of a thematic review of SIPPS. It found that SIPP operators had the “potential to lead to significant consumer detriment through a failure to adequately control their businesses.” In November 2012, the FSA published proposals to strengthen capital standards for SIPP operators. In April 2013, the Financial Conduct Authority took over responsibility for the regulation of SIPPS.

This notes looks at some of the issues raised in connection with SIPPS, such as the restrictions on investments and the regulatory framework.