Self-invested pension operators are once again to fall under the spotlight of the regulator after it launched yet another thematic review into the sector on the same day that it republished four-year old guidance for operators, FTAdviser has learnt.
The Financial Conduct Authority has written to self-invested personal pension operators stating its intention to undertake a thematic review to look at areas highlighted in a 2012 report. The move marks the third full thematic review since new requirements for firms were implemented in 2007.
In an email to Sipp operators, sent yesterday (9 October) and seen by FTAdviser, the FCA said the thematic review will specifically focus on Sipp operator financial resources, the quality of business Sipp operators allow within their schemes and “operational procedures and controls”.
In the email the watchdog said it had sign-posted its intention to undertake the review in a October 2012 report, which looked at the extent to which Sipp operators had adapted their processes and procedures to reduce risks following a previous review in 2009.
Yesterday the FCA took the unusual step of republishing the guidance it had originally issued in September 2009 following a thematic review undertaken following new rules coming into force in April 2007. A second thematic review was undertaken following the October 2012 report, but no changes were make to the guidance.
The latest review also follows on from an information gathering exercise focused on similar areas that was launched in May of this year, and comes ahead of final rules that will hike capital adequacy thresholds for providers, due before the end of this year.
The City watchdog said in the email it is “keen to understand and see in practice” the improvements Sipp operators have made following the publication of its previous reviews. It also wants to know what steps Sipp operators have taken to ensure they have the best interests of their customers “at the heart of how their businesses are run”.
The FCA also is reviewing the quality of business Sipp operators allow within their schemes.
Greg Kingston, head of marketing and proposition at Suffolk Life, labelled the FCA’s move as a “sensible, planned step”.
He said: “They’ve already benchmarked the industry once since regulation came in, they’ve laid out their expectations and guidance, and now they’re going to test the industry once again.
“The publication next month of their final position on capital adequacy supports this process, and by 2014 Sipp operators should have no doubt of the standards expected from them and the cost of running their business. As a consequence I expect consolidation to accelerate next year.”
Martin Tilley, director of technical services at Dentons Pension Management, said: “It’s not to be unexpected. The regulation of Sipps has evolved slowly since 2007 and the previous large upward steps in regulation were carried by thematic reviews by the FSA. The FCA putting their stamp on regulation was inevitable.
“What I think is encouraging is the time the new regulator FCA is taking and its previous and hopefully continued consultation with industry bodies, which should result in a well thought out solution which protects the interest of consumers, whilst not significantly increasing the regulatory costs of well run Sipp providers.”
Robert Graves, head of pensions technical services at Rowanmoor, said: “Clearly we are still awaiting capital adequacy so it is curious they are focusing on financial resources as I would have thought that would dovetail into capital adequacy paper. It seems a bit premature to look at this but clearly it is important for them to understand that firms do have sufficient financial resources.
“I am not sure quite what they mean about quality of business. That intrigues me. I am not sure what the benchmark is - if it’s compliant, it’s compliant.”
In its October 2012 report the then Financial Services Authority raised concerns that Sipp operators could cause “significant consumer detriment” due to poor compliance with regulatory requirements, particularly in the area of risk planning and mitigation.
The FSA said that firms should have a clear set of procedures in place to help them “deal with appropriately and/or control their exposure to investments that Sipp operators may not retain control over”.
Since the publication of guidance, there have been continuing concerns as to how far Sipps’ due diligence should go.
The pensions ombudsman recently rejected a complaint made against Standard Life over an apparent failure to undertake sufficient due diligence over non-mainstream life settlements bonds investments that were placed into a self-invested personal pension.
Ms Irvine said the complaint should not be upheld against Standard Life because “no injustice” was caused to investor Walter Pisarski as a result of any failure on the part of Standard Life.
The FCA declined to comment further.
