Warning over Sipp due diligence after Capita exit

The director of sales and marketing at Sipp operator Talbot & Muir said the move had “spooked” advisers who are conducting due diligence on providers, especially with talk of a concerted contraction in the Sipp market as a result of the FCA’s review of capital adequacy requirements for providers.

Mr Bridgeman said: “The loss of Capita’s Sipp administration business is significant as it was one of the largest administrators in the UK.

“Advisers are now faced with undertaking due diligence on Sipp administrators, to enable them to advise their clients on the best course of action and, more often than not, at no chargeable fee.”

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He added that the need to ramp up due diligence was leaving advisers “buried” in paperwork and administration at times when they should be advising clients. In an interim management statement issued last year, Capita said its Sipp arm, based in Salisbury, was “sub-scale and therefore unviable”.

It added that “small parts” of its insurance and benefits services division were operating in an “increasingly competitive and highly regulated markets and are loss-making.”

A spokeswoman for Capita said: “The planned time scales involved mean that there is no immediate impact on IFAs or their clients. We are currently working on detailed plans and intend to provide more information to advisers, as necessary, throughout the year.”

Andrew Swallow, director of London-based Swallow Financial Planning, said: “I have a number of clients with Sipps, and there are excellent providers on the market, but a scheme on a platform does everything that a Sipp can at a lower cost and with much greater protection. I only recommend them if a client wants to invest in commercial property or something obscure.”

Firms size (AUA IN £m)Total capital increase from existing requirement
0% 40%
Small (0 – 100)33£2.5m £11m
Medium (100 – 500)33£6m £22m
Large (greater than 500)9£3.5m £21m
Total75£12m £54m