There is not a huge choice of back office Sipp software on the market. The older systems are database-driven, typically attracting higher risk, inefficiencies and consequently higher costs. Extra staff will be needed to extract, manipulate and regurgitate data in the required formats. Producing statutory reports, evidencing TCF, producing meaningful management information, having clear checks and audit trails are just some of the issues which require manual intervention. This takes time and manual workarounds are not only costly in time and staff but also carry a higher risk of error with additional controls having to be introduced and managed.
But there are options. Some companies write their own internal systems and the newer Sipp systems are process-driven, having initially been designed to meet the growing demands of platform-based Sipps. These systems have controls embedded within which vastly reduce the risks associated with handling client money or processing investments as well as other controls to ensure, for example, pensions are not overpaid and TCF can be clearly evidenced. They have automated processes and enable the regulatory requirements to be more easily met without data having to be manually extracted, adapted and subject to potential error.
Advisers need to understand at a high level the system used by a Sipp operator: whether there is more than one, or if there is any dependency on spreadsheets or manual workarounds outside of the main system. Whatever system is used, advisers should check what basic controls are in place, outlined below.
| Checking on basic Sipp controls |
• How is tax relief reclaimed and invested each month on contributions? • Is there a clear audit trail of the actions taken and by whom? • Are daily cash reconciliations carried out? • Are client money requirements are met? • Are investment details held clearly for each client? • Are benefit crystallisation events accurately calculated and checked? • Are there controls to ensure there is no pollution of client money? • Are fees applied consistently? |
All administration systems need regular servicing and updating and continued investment but an MOT may identify failures and the need to change to a new system.
New software
It is a brave and undoubtedly costly decision to upgrade to a new model and change administration systems. The costs of the system and of the time needed to implement it cannot be underestimated. No administration system can be future-proofed and it does not matter how much time has been spent reviewing the specs and deciding on the extras, testing the most complex cases and ensuring integration with any internal work management or financial accounting systems; there will always be some teething problems.
