Pension perils of using Sipp funds for
spread bet trading
Angela Henshall
Published: Thursday 12th August 2004
This article appeared in The Money
Marketing Supplement.
City traders are using funds in their self-invested pension plans
for spread bets.
Sipp specialist IFA I-Sipp is seeing growing interest from investors
looking to use contracts for difference in their plans. It says
investors can use CFDs within their Sipp to bet for or against
a stock or share without transactions being subject to capital
gains tax.
But investors could end up losing more than they started off
with and the fund could end up in deficit. CFDs allow investors
to trade individual stocks and indices without putting up the
full underlying contract value and offer higher rewards than normal
share trading.
Investors can use Sipps to invest in futures and options but
these transactions can incur stamp duty costs while CFD investors
can go long or short and have optional guaranteed stops to put
a limit on their risk.
Pointon York Sipp Solutions managing director Christine Hallett
says: "Trustees would have to tie up the agreement on indemnity
to ensure there was no comeback. A Sipp is a tool for investment
planning, not for making a quick buck."
Origen pensions director Michelle Cracknell says: "What
happens if the pension fund goes into the red? The trustees could
have a £20,000 debt on their hands if the client disappears.
A trustee could be prevented from being a trustee if they are
perceived to have acted irresponsibly."
Gambling magazine Inside Edge editor James Hipwell says: "This
is effectively what any fund manager is doing by betting on the
stockmarket. Using a Sipp would make sense and seem to be a very
tax-efficient way of investing."
