Pensions  

‘Capital requirements to benefit investors not Sipps’

Suffolk Life has argued that Dentons Pensions’ suggestion that UK commercial property should be treated as a more liquid asset does not have the investor’s best interests at heart and could be viewed as “self-serving”.

In an interview with FTAdviser, Martin Tilley, director of technical services at Dentons, said he believes commercial property should not fall under the regulator’s higher capital requirements, adding there could be a ‘halfway house’ for this kind of asset, where a premium has to be paid but not as large as for non-standard assets.

Last year (22 November), the Financial Services Authority published a consultation paper in which it proposes to increase the minimum amount of capital held by self invested personal pension providers from £5,000 to £20,000 and adding surcharges for total assets under management and holding of non-standard assets.

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However, Greg Kingston, head of marketing at Suffolk Life, disagreed with Mr Tilley’s view, arguing capital adequacy proposals are in place principally to ensure the safe transfer of an investor’s assets from a failed provider to a new one; for the new provider this process is akin to a new property.

He said: “Capital adequacy requirements do not exist for the benefit of Sipp firms, but instead for their investors. The suggestion that commercial property should be treated as a more liquid asset as it can be sold at auction within 28 days clearly does not have the investor’s best interests at heart.

“Suggestions such as this really do risk parts of the industry being viewed as self-serving and not operating in the best interests of their investors. It is contrary to the regulator’s thinking and I’d urge them to reflect on what risks their proposals in CP12/33 in the first place. I don’t believe those risks have lessened.”

AJ Bell previously criticised the FSA for omitting commercial property from its list of ‘standard investments’ for self-invested pensions, which it says could push more providers to stop offering valuable investment options to clients.

Billy Mackay, marketing director at AJ Bell, previously said: “The FSA’s concern with commercial property will be that it can take some time to dispose of a property from a Sipp. The industry will argue that the time it takes to dispose of a property isn’t an issue because of the range of Sipp operators who would be prepared to hold the property.

“At a time when the way in which Sipps and platforms are being used by advisers is becoming more closely aligned, it may also be reasonable to consider whether the rules should allow for this.”