Dentons to lobby against FSA capital adequacy rules
Self-invested personal pension provider Dentons will make “a strong case” against FSA proposals to raise capital adequacy requirements for providers which invest in commercial property, Martin Tilley has said.
The director of technical services for Dentons, said the exclusion of commercial property from the FSA’s preliminary definition of standard assets would drive up costs for consumers, since firms would be forced to hold greater amounts of capital for ‘non-standard’ assets.
He said: “I fully support measures to make Sipp providers better capitalised to reduce risk. However, if we are to accurately measure how much we hold in ‘non-standard’ assets, would we need to have valuations every year, or even every quarter, for commercial property?
The additional costs would inevitably be passed onto the consumer, just when we need to be doing all we can post-RDR to open up choice of products.”
Mr Tilley also expressed concerns over the potential “buying sprees” of larger Sipp providers, who could swallow up smaller firms forced to leave the market in the wake of the new regime.
He said: “Advisers will now have to be careful in backing certain providers who they want around in five years’ time, given the costs of moving from one Sipp to another. No client wants to be told the company they originally invested in has had to be taken over. This seriously affects the IFA, who’s now seen to have not made a great decision.”
The FSA estimates that moving the minimum amount of capital required from £5000 to £20,000 could drive 18 per cent of Sipp providers out of the market.
The regulator wants to levy a capital surcharge for non-standard assets to reflect the cost and time of winding down a Sipp book containing such assets.