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Unregulated investments should be allowed to be recommended as a viable option for long-term pension planning in self-invested personal pensions, according to an industry consultancy.

SIPP providers and advisers are put off these type of investments due to a serious of high-profile problems for unregulated investments such as Harlequin, Connaught and Stirling Mortimer.

Financial Services Compensation Scheme pay outs went up by 35 per cent to £105m in 2016/17.

The FSCS’s annual report said of the SIPP-related claims increase: “These investments are often high risk and unsuitable for most investors. Their riskiness means some investments inevitably fail and become liquid.

“This trend began two years ago and has continued this year, with claims against an increasing number of failed life and pensions advisers.”

Industry expert, Chris Jones, founder and principal of the Rock Consultancy, said investing in pensions means “tying up capital for a decent period of time”.

Therefore SIPP market should be allowed to commit funds to “good quality investments which are not in the regulated regime”.

He said: “There are plenty of unregulated funds which are good quality funds, but that are not regulated in the UK or do not meet the liquidity requirements.”

Since 2006, there is only one set of investment standards for all registered pension schemes, including SIPPs, which is set by the HM Revenue & Customs.

HMRC does not allow investments in residential property even if on a buy-to-let basis.

The UK SIPP market is expected to grow to £350bn by 2020.

The number of SIPP providers is expected to fall from 71 to 50.

Last year, Mr. Jones argued that failing SIPP providers should be gathered into a form of ‘bad bank’ style solution to protect clients against toxic investments.

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