Platform firms Warn FCA SIPP Due Diligence Rules Could Hit Legacy Savers

The trade group representing the UK's largest retail investment platforms has told the Financial Conduct Authority that its proposed SIPP due diligence rules risk harming consumers holding legacy assets, and has asked the regulator to spell out how far firms are expected to go before the checks become unworkable.

The intervention responds to CP26/20, the FCA's consultation on adapting its rules for self-invested personal pensions, which closes on today. The UK Platform Group (UKPG), an independent body of retail platforms for which PIMFA acts as secretariat, said it broadly backs the direction of travel but wants material gaps addressed before the rules are finalised.

What is the FCA actually proposing?

CP26/20 sets out rules in two areas. The first tightens due diligence requirements on SIPP operators to reduce exposure to scams and fraud. The second introduces a Pension Scheme Money and Assets regime, aimed at firms that use unauthorised trustees, to ensure pension money and assets are protected and accurately recorded.

The FCA frames the changes as raising standards consistently across a market that has expanded well beyond its origins. SIPPs were introduced in 1989 to give investors more direct control over their pension investments. By 2024 they accounted for roughly a third of the assets held in FCA-regulated defined contribution pensions, with assets under administration of approximately £567bn spread across 5.3 million consumers. The consultation builds on the FCA's earlier discussion paper DP24/3, published in December 2024.

Why are legacy assets the sticking point?

The core of the platform sector's concern is that the proposals apply cleanly to new business but poorly to arrangements firms did not originate.

Julia Sage-Bell, Senior Policy Adviser at PIMFA, speaking on behalf of the UKPG, said the group broadly supports the due diligence proposals but that several requirements need further clarity, with the treatment of legacy arrangements the most pressing. She said: "In their current form, the proposals risk imposing a host of unintended consequences on consumers with legacy assets. In cases where firms have inherited arrangements, through acquisitions in-specie transfers or historic business models, firms may not have sufficient influence to implement new terms of business or revised contractual obligations. While the proposals expect firms to 'take reasonable steps to mitigate harm' where due diligence requirements can't be met, in many cases firms will be unable to take action due to product or legislative restrictions. In other cases, action will result in consumer detriment through charges or taxation."

The point matters because platform books are frequently assembled through consolidation. Where a firm has absorbed another provider's clients or received assets via in-specie transfer, it may hold no contractual lever to impose new terms retrospectively. The group's warning is that a rule demanding remediation the firm cannot legally deliver either becomes a dead letter or forces action that triggers charges or a tax event for the saver, the opposite of the consumer protection the FCA is seeking.

What does the sector want changed?

Two asks stand out. The first is proportionality that the regulator defines rather than leaves to interpretation. Sage-Bell said the FCA "must set out clear expectations of firms and establish how proportionate these checks have to be," arguing that only then can firms size the resources required and judge whether the proposals are realistic.

The second is consolidation rather than duplication in the FCA Handbook. The UKPG wants the regulator to retain and refine the existing standard and non-standard asset classification instead of layering a new list of assets subject to core or additional due diligence on top of it. In the group's view a single, streamlined classification would support consistency, simplicity and automation, and deliver better consumer outcomes over time. A parallel framework, by implication, risks conflicting obligations and manual workarounds that raise cost without raising protection.

How does this fit the FCA's wider pensions agenda?

The response lands amid a broader push to modernise the rules around pension transfers and retail investment. The same platform group recently backed the Department for Work and Pensions' proposals to reduce friction in pension transfers while pressing for tighter drafting, arguing that vague standards create as much risk as lax ones. The pattern is consistent: support for the policy objective, resistance to wording that leaves firms exposed to obligations they cannot meet.

That positioning reflects a structural tension in consumer investment regulation. Rules written for a market of new, cleanly documented business collide with a real-world book built over decades of consolidation, in-specie transfers and product structures that predate the current rulebook. The FCA's secondary objective to support the competitiveness and growth of UK financial services sharpens the trade-off, because compliance costs that fall hardest on legacy assets can deter the consolidation that underpins platform economics.

Why This Matters to FinanceX Readers

For platform operators, SIPP administrators and custodians, CP26/20 is a cost and feasibility question as much as a compliance one. The unresolved issue is whether the FCA will define proportionality precisely enough for firms to budget against it, and whether it will fold new due diligence duties into the existing standard and non-standard asset framework or run a second classification alongside it. The answer determines how much manual remediation lands on legacy books, and whether savers in inherited arrangements face charges or tax consequences from checks their providers are contractually unable to complete. With the consultation window now closing, the FCA's Policy Statement will show how far it has moved on the industry's two central asks.