Missing The Point?
The recent demise of the Freedom SIPP and the hefty tax charges on its unfortunate clients has generated a lot of column inches. Rightly so, and the comments that the regulatory regime is not fit for purpose when pension investors, through no fault of their own, suffer when their provider gets wound up certainly appear to be justified.
But thinking out loud here isn't this missing the point? A perfectly good escape mechanism exists for clients if they transfer their funds to another provider and avoid any tax charges and from what I have read, the regulators are doing all they can to help this process. The problem with the Freedom SIPP, as I understand it, is that many cannot transfer because they invested in unacceptable French holiday property.
So the real problem here is not a failure in the system when a pension provider goes under, but a failure in the system which allows large numbers of clients to do something unacceptable in the first place. Now come on let's be honest pretty much the whole world outside the Freedom SIPP knew some time ago that these investments were being made and believed them to be unacceptable. I'm not trying to be smug or kick someone when they are down (and I don't know the time line on events between then and now) but as an onlooker I can't help wondering if something could have been done to put a stop to it sooner.
We've been here before - mis-selling of personal pensions was a case in point, with a large sector of the industry believing at the time that mis-selling was going on, yet it continued and we then had years of vast cost clearing up the mess, with over-reaction resulting in some perfectly reasonable transfers by advisers being looked at with hindsight and penalised.
If we are going to learn anything from this, it has to be that when most of the industry and the regulators are looking at something and thinking that it doesn't look right, something needs to happen quickly for everybody's sake: the innocent members of the public being sucked into such Schemes, providers who will be forced to cope with the burden of additional regulation after the event and most importantly the industry as a whole that gets tarred with the same brush.