Pensions  

Call for FCA to hike planned Sipp capital threshold to £50k

Self-invested pension trade body the Association of Member-Directed Pension Schemes has called for the Financial Conduct Authority to increase its proposed capital threshold for providers in the sector to £50,000, from the currently planned £20,000 minimum.

A consultation paper in November proposed increasing the minimum threshold from the current £5,000 to £20,000.

The paper also outlined plans to change the formula for working out each provider’s specific requirements, from a simple multiple of liabilities to be met over a number of weeks to a weighted formula based on assets under administration that demands more capital to be held against ‘non-mainstream’ assets.

Controversially, ‘non-mainstream’ included commonly held assets such as commercial property.

Following a Freedom of Information Act request, Amps obtained 55 out of the 57 responses to CP12/33 and noted strong backing for enhancing consumer protection but minimal support for the regulator’s formula, which many believed was not supported by evidence.

Discussing the findings at the Amps annual conference yesterday (21 May), the association’s chairman, Barnett Waddingham’s Andrew Roberts, said there was universal support for a higher minimum threshold and even calls - which the trade body supports - to set this at £50,000.

However, Mr Roberts suggested the FCA should introduce an ‘interim’ amendment to the rules setting a higher minimum only while it consults further on the formula for working out specific requirements.

He said that although there was no universally agreed system in the consultation feedback, there was general support for use of number of Sipps in force and number of investments as a better measure of costs required on wind-down than assets under administration.

Some companies suggested capital adequacy should relate to turnover.

According to Amps, feedback demonstrated “disbelief” that fixed-term deposits could be treated as non-standard assets, and a running theme that commercial property was a common investment within Sipps.

Noting that property can take longer to transfer, some companies suggested a different surcharge for property than other non-standard assets.

Mr Roberts said: “The rules do not need to be over-engineered and simplicity has its advantages. The final outcome should present prudential requirements that do not needlessly force out well-run Sipp firms.

“The FCA has an unenviable task in settling on a system that will be fit for purpose in years to come but will be under pressure to increase current requirements. I suggest that every Sipp provider is mandated to move to 13 weeks’ expenditure as an interim measure, with a minimum of £50,000.

“The FCA can then explore whether there is any need to increase the capital requirement above this level, or move from expenditure to turnover. If evidence shows that consumers are not sufficiently protected at the new level, they should investigate a formula having regard to the number of in force Sipps and the nature of the underlying investments.”