LONDON - The Treasury finally took some steps to safeguard pension funds that are invested in property markets under the self-invested personal pensions (SIPPs) by announcing that it would allow the Financial Services Authority (FSA) to regulate SIPPs.
Such regulation would ensure that investors' funds have a safety net in case anything goes wrong. Analysts say that regulation is necessary since many sellers are embarking on an advertising blitz claiming to offer 40 percent discounts on second homes. They are of the opinion that the scheme would primarily benefit higher-end taxpayers who would get huge rebates on residential properties, thus sparking a buy-to-let boom. Last month, Norwich Union had warned that a major mis-selling scandal could rock SIPPs and had called for governmental regulation.
Chancellor Gordon Brown was apparently very concerned about the prospect of a scandal and has decided to ask the FSA to regulate the scheme. However, the regulation would be effective only from April 2007, a whole year after SIPPs comes into existence, meaning that for one year the scheme will remain unregulated thereby giving a free hand to unscrupulous elements.
This is precisely what is being generally criticized, “Leaving regulation for another year will mean the door is shut after the mis-selling horse has bolted. It leaves the door open for spivs and sharks," said Lord Oakeshott, the pensions spokesman for the Liberal Democrats. A spokeswoman for the FSA said that the one-year gap was necessary for consultation, “We will do what we can in the interim period to remind consumers of the advantages and disadvantages of saving through a pension scheme, including the risks of investing pension fund moneys in things like residential property," she asserted.
But Oliver Letwin, the Shadow Secretary of State for Environment, Food & Rural Affairs was critical of the decision to leave the scheme unregulated for one year, “If the Government wants to have a joined-up policy, it needs to counterbalance the effect of the tax break divided by the Sipp for second homes through constructing a serious and effective shared equity scheme," he said.
Posted
on : Sat, 01 Oct 2005 10:40 GMT | Pensions News
By : Mark Richardson
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