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Dear CEO | Release Date: 12th May 2023

To read a shorter summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Long Summary

The Financial Conduct Authority (FCA) has issued a directive to Self-Invested Personal Pension (SIPP) operators, emphasising the critical role they play in managing over £205 billion of pension assets for 1.7 million consumers. This letter outlines the FCA’s updated supervisory strategy, focusing on maintaining high standards within the SIPP operator portfolio and ensuring robust consumer protection.

Developments and Regulatory Context

Since the last communication in December 2020, the FCA has introduced several strategic documents, including the Consumer Investment Strategy and the Business Plan for 2022-25, emphasising the prevention of harm and the enforcement of higher standards. Notably, the impending Consumer Duty, effective from 31 July 2023, mandates a more outcomes-focused approach, heightening expectations for consumer protection.

Persistent Concerns and Observations

Despite some improvements, the FCA continues to observe significant issues within the SIPP sector, including firm failures and problematic SIPP operator administrations. These issues underscore the need for enhanced operational and financial resilience, along with a proactive approach to meeting the new Consumer Duty requirements.

Identified Harms and Priorities

The FCA identifies several persistent harms in the SIPP sector:

Firm Failures: Disruptions and additional costs to consumers, potentially leading to unauthorised payment charges.

Redress Issues: Delays and challenges in providing fair and timely redress to consumers.

Pension Scams and Inappropriate Investments: Increased risks due to inadequate due diligence on non-standard assets and investment scams.

The focus remains on financial resources, complaints handling, due diligence, and product governance to mitigate these risks, with systems and data now also highlighted as a priority area.

Expectations for Redress Handling

The FCA stresses the importance of SIPP operators proactively addressing redress issues. Operators should ensure that consumers who are due redress receive it promptly and that systemic issues identified through complaints or other means are addressed effectively, in accordance with both existing principles and the forthcoming Consumer Duty.

Financial Resources and Firm Stability

Operators are reminded of their obligation to hold adequate financial resources, as outlined in FCA guidance (FG 20/1) and Principle 4 of the FCA’s Principles for Businesses. Accurate risk assessment and contingency planning are crucial, especially in light of potential firm failures and the need for orderly market exits.

Due Diligence and Operational Standards

Operators must maintain high standards of due diligence to prevent harm from unsuitable investments and business relationships. This includes rigorous checks on introducers and investments, continuous monitoring, and adherence to both current regulatory standards and the Consumer Duty.

Product Governance under Consumer Duty

The new Consumer Duty introduces specific requirements for product governance. SIPP operators, as both manufacturers and distributors, must clearly define their target markets and ensure their products are appropriately distributed to prevent foreseeable harm and ensure fair value.

Systems and Data Integrity

Given the shift towards a more data-driven regulatory environment, SIPP operators are expected to invest in robust systems capable of handling detailed and accurate data collection and analysis. This is crucial for effective oversight and compliance with regulatory expectations.

Action Points and Next Steps

Review and Adaptation: Operators must review their current practices against the FCA’s expectations and make necessary adjustments to align with the new Consumer Duty.

Engagement and Reporting: Ongoing engagement with the FCA is essential, and operators should be prepared to demonstrate compliance and proactive management of identified issues.

Preparation for Consumer Duty: With the upcoming implementation of the Consumer Duty, operators need to ensure they are fully prepared to meet the new requirements by the deadline.


SIPP operators are urged to take immediate and comprehensive action to address the highlighted concerns, ensuring that they not only comply with current regulations but are also well-prepared for the introduction of the Consumer Duty. The FCA expects operators to maintain the highest standards of conduct, with a strong focus on consumer protection and market integrity.

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