People with Self-Invested Personal Pension schemes, or Sipps, may face hefty tax bills due to a loophole in the way that pension statements are regulated, according to some pension providers.
According to experts, the Financial Conduct Authority’s rules for scrutinising partially reconciled Sipp statements are not as clear cut as they are for “fully reconciled” ones.
This has produced something of a grey area regarding rules around partially reconciled Sipp statements and industry voices are saying this is ripe for misinterpretation.
Potentially, the rules could be interpreted in quite a wide variety of ways and it is suspected that different providers will interpret them in a way that suits them and saves them the most money.
The predicted effects of this are that the providers will have inadequate controls in place to ensure the Sipp is doing what it is allowed to do. These lack of controls and smudging of the interpretation of rules could leave Sipp holders vulnerable to unexpected tax hikes due to inexperienced investment managers investing in assets that are not Sipp-permissible. If details like this emerge lateer on, it could lead to a big tax bill either the customer or the provider.
Some sources state that the very public voicing of such concerns is purely scaremongering with very few Sipp clients – those who hold taxable property in their Sipp – being affected by the loophole.