Independent Financial Advisers (IFAs) could face investigation and fines in 2009/10 if urgent transfer reviews processes, product solution, and audit trails are not employed, says Defaqto.

In its latest report on Self-Invested Personal Pensions (SIPP) 2009, Bridge Over Troubled Waters, the financial information provider warns that the Financial Services Authority’s (FSA) pension switching review clearly indicates that IFAs have been cautioned as to their conduct in the SIPP arena.

The survey also found that 66 per cent of IFA respondents felt that the FSA’s Thematic Review on transfers into SIPPs, which took place in 2008, had no impact on their likeliness to recommend SIPPs. A quarter are now reviewing the suitability of SIPPs, and 11 per cent confirmed that they are now concerned about recommending SIPPs in the future.

However, Defaqto believes that SIPP business is future-proof in terms of surviving in a post-Retail Distribution Review (RDR) world due to the products flexibility and potential to play the role of a direct to market pension product.

However, the survey results are concerning when it comes to the potential impact of the Budget 2009’s change to pension tax relief for high earners – 45 per cent of IFA respondents said the reduction in tax relief will have a negative impact on their future SIPP business.

- Pensions Age June 2009