Decumulation Telemetry: Tracking SIPP Drawdown Lag as Foreseeable Harm

The statistic the client never sees

Retail pension platforms and SIPP operators often cite a high dealing standard — “95% of disinvestment instructions placed within 48 hours” — as proof the operation is sound. For the member waiting on retirement income, that figure stops too early. Three or four weeks can pass between the instruction and cleared funds in the bank account.

Under Principle 12 and PRIN 2A, that gap is not an unavoidable feature of markets. Where dealing cycles, payroll batches and internal queues leave a decumulating client out of the market, the cross-cutting duty in PRIN 2A.2 is in point: avoid causing foreseeable harm.

Where the days actually go

In accumulation, a slow trade is friction. In decumulation, the same delay can destroy capital through the sequence of returns, or through cash that sits idle after the sale. A diversified SIPP does not settle as one asset.

Listed equities and ETFs generally settle on T+2. UK authorised funds often settle on T+3 or T+4, on the fund’s own valuation point. Commercial property and other specialist assets may deal monthly, queue redemptions, or suspend. The client’s experience is the slowest of those clocks, plus whatever the operator adds.

The slowest-asset lock

A common middle-office rule is all-or-nothing. If 80% of the pot is in daily-dealing funds and 20% is in a slow asset, the whole payment waits for the slow asset. Proceeds from the liquid sale sit in a non-interest-bearing cash account. If markets rise, the member has uncompensated cash drag. If the sell orders wait in a queue while markets fall, the proceeds can come in short, a second trade is needed, and the clock starts again.

Three places sludge shows up

Under PRIN 2A.2 and PRIN 2A.6, unreasonable friction in the design of the journey is a conduct issue, not a back-office inconvenience.

A vague disinvestment instruction

“Liquidate pro rata” across dozens of holdings produces fractional sales, dealing costs and leftover units that reduce the net pot. If an administrator chooses which holdings to sell without a mandate, the operator has strayed into a discretion it may not have.

Cleared cash and a fixed payroll

Many operators pay on a weekly or fortnightly PAYE run. A trade that settles on Thursday morning can sit until the next cycle. The operations record says the fund settled inside its own timetable. The member’s money has left the portfolio and has not reached the bank.

A hold nobody is told about

Address checks, signature matching and probate queries often drop a file into a queue with no message to the member or the adviser. For someone in financial distress, or with a recorded vulnerability, that silence is a SYSC and PRIN 2A.6 problem as well as a delay.

What the board should count

Who was holding the file

When a complaint reaches the Financial Ombudsman Service, the argument is often about market movement during the wait, and which firm in the chain caused the wait.

COBS 2.1.1R and PRIN 2A.5 both ask whether the client was given a fair account of those constraints before the instruction was taken. A timeline that cannot separate the adviser’s clock from the platform’s clock cannot allocate the loss.

What reduces the harm

• Pay liquid proceeds as they settle. Do not hold a daily-dealing sale behind a monthly-dealing fund unless the member has asked for a single payment and been told what that wait means.
• Keep a cash buffer for regular income. A rolling 12-to-24-month reserve for routine drawdown avoids selling into a queue every month.
• Escalate a long out-of-market period. A second-line alert when the total, from validation to the bank, passes 10 business days is a control. A complaint is not.

Firms that replace a dealing SLA with the full journey can show an SMF holder, a Skilled Person and an Ombudsman investigator where the days went.

This note sits inside the Consumer Duty governance cornerstone.