It’s been another bruising year for SIPP providers as more court cases, complaints and controversies continue to cast a cloud over the sector.

SIPPs accounted for the largest number of FOS complaints about pension products for the 2019/20 financial year. The problems surrounding SIPPs mainly revolve around non-standard investments and where responsibility should lie when these investments go wrong.

In June 2020, the FSCS put SIPP provider Pointon York in default owing to compensation claims related to nonstandard investments. Meanwhile, both Liberty Sipp and Berkeley Burke have fallen into administration. The debate about who should ultimately be responsible for vetting SIPP investments rages on. Court case decisions seemingly conflicting with the views expressed by regulators underscore the need to establish clear and unambiguous rules surrounding non-standard investments.

Whether this entails the introduction of permitted investment lists or restricting access to non-standard investments to sophisticated investors, rules are needed to enhance consumer protection and limit future SIPP failures.

But any new rules will also raise the spectre of SIPPs in their traditional format being regulated out of existence. Some argue that capital adequacy rules have already restricted the investment choice of consumers, thereby undermining the whole premise of investing in SIPPs. Regulators therefore face the difficult balancing act of protecting SIPP investors from adverse outcomes while at the same time preserving their investment freedoms.

Perhaps part of the solution lies in developing different rules for different parts of the market. The SIPP market has become so polarised that the new breed of low-cost D2C offerings bear little resemblance to the more traditional models aimed at sophisticated investors.

Indeed, regulation, technology and the democratisation of investing has seen the SIPP undergo an evolution few could have foreseen at its inception in 1989. The problems associated with the SIPP are largely a function of its exponential growth and changing customer base. But the SIPP remains a key part of the retirement landscape. And as people take more control over their pensions, the SIPP market is set for further growth.