Defining different types of self-invested personal pension (Sipps) could prove useful as the regulator considers its approach to capital adequacy, according to Sipp providers.
Robert Graves, head of pensions technical services at Rowanmoor, said the market will inevitably start polarising in light of a capital adequacy calculation based on standard and non-standard assets.
“You could almost be splitting the market into standard Sipps and non-standard Sipps,” he said. “You might start defining the market better.”
At present, Sipp operators do not have to define what type of Sipp they offer. The market generally falls into three informal categories: simple Sipps (primarily platform-based), bespoke or full-range Sipps (those that offer access to most or all allowable investments) and mid-range (somewhere between the two).
However, defining a set criteria could easily lead to almost all Sipps being classified as mid-range.
“You might get some Sipp providers that are essentially standard but do offer commercial property,” Mr Graves said.
He added that some review agencies base their ratings on how comprehensive a Sipp is, when a simple Sipp could warrant a high rating in its own right as a simple Sipp.
“It would almost be better if there was a way of splitting the market up,” he said.
Martin Tilley, director of technical services at Dentons, said there has always been a split of sorts but there are no set lines.
“You have an awful lot of stuff that crosses the border,” he said. “The grey area in between has always been the problem. It wouldn’t be amiss to have more than one category of standard and non-standard.”