Background
In the FCA’s Discussion Paper 24/3 Pensions: Adapting our requirements for a changing market, published in December 2024, it asked for feedback on its approach to SIPPs. The FCA explains CP26/20 that it has analysed the responses to this discussion paper and undertaken further stakeholder engagement and has now developed proposals based on this to ensure firms protect their SIPPs customers appropriately.
Summary
The FCA has set out in CP26/20 that it is making the following proposals in relation to SIPPs:
- Due Diligence: The FCA highlights that it considers that SIPP operators have an important role to play in ensuring the investments they offer to consumers do not expose them to fraud risks but that it is concerned that some firms’ due diligence is not adequate. As a result, it is consulting on certain changes to its rules:
- Scope: That due diligence rules will apply to personal pension schemes where the primary purpose and design of the scheme, or the relevant element of the scheme, is to give consumers flexibility and choice over the underlying investments on an ongoing basis.
- Due diligence on relevant third parties: That SIPP operators must carry out initial and ongoing due diligence on third parties that introduce members or facilitate investments to be held within a SIPP, and those that acquire and manage investments for the scheme on behalf of the consumer (without the SIPP operator being involved in the transaction).
- Due diligence on SIPP investments: That SIPP operators must carry out appropriate due diligence on investments they are instructed, by or on behalf of a consumer, to arrange to be acquired for a scheme they operate. This must enable them to form a reasonable understanding of the nature and risks of the investments, so they do not accept investments that unduly expose consumers to the risk of harm from scams and fraud or investment propositions that lack credibility.
- SIPP investments made by third parties: Proportionate and focused due diligence requirements that address the specific risks associated with third parties that acquire and manage assets within a scheme.
- Governance, management information and record-keeping: That firms establish processes and controls that ensure they carry out effective due diligence that complies with the proposed rules.
- Monitoring: Proposals will require SIPP operators to have processes to gather and analyse management information to help them assess the effectiveness of due diligence processes, including identifying potential risks or trends, to protect consumers from possible scams and frauds.
- Documentation and record-keeping: In line with their obligations under the Senior Management Arrangements, Systems and Controls sourcebook (SYSC), SIPP operators must maintain documentation that clearly demonstrates their compliance with all due diligence requirements.
- Implementation period: To allow 12 months for firms to make the necessary changes to their due diligence processes and procedures, recognising that firms may need time to review existing arrangements
- Pension scheme money and assets: The FCA also sets out that it considers that SIPP operators need to be able to identify what money and assets are held for each individual SIPP or member’s arrangement; however, that the rules in the Client Assets sourcebook (CASS) do not apply to them although some firms have, on their own initiative, applied or sought to mirror elements of CASS where it does not apply but this has been done inconsistently and to varying standards. As a result, the FCA proposes to introduce the following:
- Pension Money and Assets Regime (PSM&A): This new regime is intended to set clear minimum standards so that there is consistent consumer protection across all SIPP firms and requiring firms to: ensure that pension scheme money and assets are securely held, accurately recorded and subject to effective oversight, enabling firms to identify those money and assets promptly; improve the quality and accuracy of firms’ books and records; require firms to carry out regular checks to ensure these records are complete and accurate; protect against delays or issues where a client transfers assets or where a firm winds down, particularly for disorderly wind-downs; enhance monitoring and information flows from different firms involved in SIPP arrangements.
- Implementation period: Due to the scope of the changes, the FCA proposes a two-year implementation period before the requirements come into force.
In light of these proposals, the FCA also propose to retire the 2013 non-Handbook guidance provided in FG 13/08.
Next steps
The FCA has asked for feedback on this consultation by 24 August 2026.