BondMason boss warns that recent FSCS fines are likely make SIPP providers extra cautious in reviewing non-standard investments.
An estimated one million people are said to have taken up a SIPP (self-investment pension plan) since the wrapper was first introduced as part of the government’s Pension Freedom Reforms in April 2015. But squeezing non-standard investments into the still relatively-new tax wrapper hasn’t been easy.
In light of recent fines doled out by the FSCS to certain SIPP providers, BondMason CEO Stephen Findlay (pictured) gets the cautious approach being taken by SIPP administrators towards P2P lending and other non-standard types of investment.
But with demand for these investments steadily rising, Findlay is calling for an “open discussion” between SIPP providers and investment providers on the matter.
“Lending, including P2P Lending, can be an effective way of accessing attractive risk-adjusted returns for your portfolio,” he said. “Our clients have achieved an average gross return in excess of 8.0 per cent p.a. across 2015, 2016 and 2017. It’s therefore understandable that more and more SIPP clients are asking their providers for access to non-standard assets, including P2P lending.”
BondMason is an aggregator of sorts. It filters what it describes as the best lending opportunities from across the UK direct lending and P2P lending market, then making them available through a single portal. The firm claims to have conducted due diligence on over 100 platforms to date.
BondMason works with administrators such as Morgan Lloyd and Westerby to make SIPP investments available to its investors. Findlay acknowledges that peer-to-peer lending is a “growing and complex” asset class, with a great deal of diversity among providers, but adds that BondMason works closely with its SIPP partners to get them comfortable with its non-standard offering.
John Dowding, technical director at Morgan Lloyd, offered his thoughts on working with BondMason: “We recognise that clients are searching for better returns. The point is that many non-standard investments, such as these store pods and carbon credits, result in very little or no return of capital, and indeed many have been uncovered to be outright scams, although they have been promoted to SIPP providers quite aggressively. There is certainly significantly increased caution amongst SIPP providers regarding esoteric non-standard investments.”
The FSCS announced earlier this year that it would be paying out on at least 150 claims for clients who invested through three failed SIPP firms – Brooklands Trustees, Stadia Trustees and Montpelier Pension Administration Services – which it declared in default.
Dowding warned that many non-standard investments, such as store pods and carbon credits, are well worthy of increased caution among SIPP providers, with many amounting to “outright scams”.
But Dowding is far more positive on the subject of peer-to-peer loans. “When it comes to P2P Lending, I would say it comes high up the scale of respectability in terms of the non-standard asset scale, not least because of its endorsement as an acceptable investment for ISAs,” he said.