There has been much speculation as to the effect it will have on the industry but any notion that it could prove too onerous is senseless.
Sipp providers should be more than capable of meeting the new requirements if they have a strong and stable business and we should be doing all we can to ensure that the industry, as a whole, is as financially firm as can be.
When choosing a Sipp provider, clients want to be absolutely sure that their chosen provider will be in existence for the duration of their retirement so looking at their financial strength and long-term stability is crucial.
Hornbuckle Mitchell believes the proposed capital adequacy rules are absolutely right for the industry and protection of consumers and would urge financial advisers and clients to take into account the capital adequacy position of providers when making a decision where to place their business.
In my view, the industry should be doing all it can to protect consumers if it wishes to be treated in a grown-up manner and robust capitalisation will certainly prompt greater confidence among pension investors.
The emphasis must be on ensuring that the costs of wind down are covered if any operator goes under so taking a risk-focused approach rather than cost-focused is the right way to go.
Of course the new rules will inevitably have a negative impact on some of the very small providers with high-risk books and I predict a wave of consolidation in the market. From a consumer protection point of view, surely this cannot be viewed as a bad thing.
Lisa Webster
Senior technical consultant
Hornbuckle Mitchell
Leicester
