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The Slippery Issue of the SIPP Skim

I find it interesting that providers who indulge in this practice seem, in part, to be using the prevailing low interest rates as justification for the practice.  Are they, in part, therefore suggesting that it was less palatable when the interest rates were higher but ok now they are low?  Surely the issue is transparency and earning money from not actually doing anything rather than the size of the skim?

Well, not according to the usual suspects keen to defend the practice.

A typical argument from such providers is that:

"A provider may receive an interest rate of 5% and pass on 2% or 3% of that. This seems fair. This interest is the result of a business deal, and doing away with this benefit will rankle with some SIPP providers. Concerns around this practice are overstated and often part of a viable business model."

Is it ‘fair’ that a provider which has already charged their client a fee for a service should then receive additional revenue from their client’s money sitting in a bank account? A viable business model and an ethical one are often two distinct things. Let’s not allow the former to cloud the latter.

Some providers are arguing that fees can’t be wholly transparent upfront due to the complex metrics of working out the lifetime cost of a SIPP – justification to charge by the back door? How about having an honest and open set of fees and a regular line of communication with your client? Works for us.