The Freedom SIPP Limited (TFSL), a self-invested personal pension (SIPP) provider, has been wound up in a High Court judgement for non payment of tax.

TFSL had, until Wednesday 14 October 2009, been the provider of the Freedom SIPP scheme, and voluntarily closed to new business in September 2008. The FSA has supported this High Court decision to wind up the business on the basis of its statutory objective to protect consumers.

The FSA already took action in response to concerns about TFSL's running of the product. This included imposing an asset requirement on TFSL in July 2008 preventing the release of any scheme members' funds without the consent of both TFSL and the member concerned. The regulator then wrote to members on 28 July 2009 informing them of this, which was followed by a second letter on 14 August 2009 advising them of the petition issued by Her Majesty's Revenue and Customs (HMRC), the possible implications, and recommending that members seek advice.

John Moret, director of sales and marketing at SIPP provider Suffolk Life, questioned whether, in light of the Freedom SIPP judgement and the FSA's recent thematic review of smaller SIPP providers, the current regulatory regime is fit for purpose. "The structure of SIPPs varies enormously between providers leading to a whole range of inconsistencies including differing capital requirements and the application of different regulations on custody of assets etc. It is a complex regime. If it is fit for purpose then how did we arrive at today's situation? By initially concentrating their resources on larger SIPP providers did the FSA allow smaller providers too much freedom in the early days of regulation? Was the original regime for establishing a SIPP under which a provider of substance was needed - rather than simply a regulated operator - a better framework?"

The FSA has confirmed that members will still be able to request a transfer of their investments to another scheme.

"The liquidator will presumably be responsible for either winding up the scheme or organising a block transfer if another regulated operator can be found to take the business on," Moret explained. "But what operator would be prepared to take on this book of business given the potentially significant liabilities - not just regulatory. The current legislation and regulatory framework seems to provide inadequate protection for investors; indeed what compensation arrangements, if any, apply to the current situation. It doesn't seem that any assets have gone missing - although this isn't totally clear at this stage so to that extent the investor's interests are safe - except to the extent that tax charges erode the value of the investments."

Moret suggested that "maybe all SIPP schemes should have the equivalent of a 'living will' that would allow them to be wound up quickly in the event of a future financial crisis".

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