After almost two years of deliberations, the FCA has announced the new rules that will increase the amount of capital self-invested personal pension (Sipp) providers must hold in reserve.
The FSA had previously consulted on a new regulatory capital framework for Sipps in November 2012, but the FCA has made further amendments on the rules. There is approximately £2tn of pension assets under management in the UK pensions industry alone, and it is estimated £100bn of these assets are administered through Sipps.
The paper – PS14/12 – said the fixed minimum capital requirement is to be raised from £5,000 to £20,000. The FCA said many respondents to the consultation paper suggested an even higher figure of up to £250,000.
But the new regime will mean the initial capital requirement calculation is to be based on a firm’s assets under administration over the last four quarter-end dates rather than a set point. The regulator expects this to “reduce the compliance burden on operators.”
The FCA has also said UK commercial property will now be seen as a ‘standard asset’. The rules will not come into force until 1 September 2016, so firms still have two years in order to meet requirements.
Nick Poyntz-Wright, director of long term savings and pensions at the FCA, said, “Under the current capital requirements we have a real concern that when a Sipp operator exits the market people’s pension savings could be put at risk. The new rules we have put in place will help to ensure that firms carry sufficient capital to fund an orderly closure without having a knock-on impact on consumers’ pension pots.
“We have listened to the industry since our initial consultation and made a number of changes to proposed rules to ensure that they will work for better for firms helping to ensure that consumers get the best protection for their pension.”
But how the move will affect smaller firms is yet to be seen. There has already been one acquisition since the paper, with many industry experts predicting there will be more to come. Dentons, provider of Sipps and small self-administered schemes (Ssas) announced soon after that it has acquired the Sipp book of MAB Pensions Limited for an undisclosed sum. The move – the first provider to see an acquisition after the capital adequacy paper was released – will see Dentons add approximately 125 Sipp plans to its existing book, now totalling more than 4,000 clients.
The next Money Management Sipp survey and special report is out next month.
charlotte.richards@ft.com
