Several large life offices have refused to disclose how prepared they are for capital adequacy rules that are expected to be announced over the next three months.
The latest Money Management survey of self-invested pension providers asked firms what percentage of the proposed new capital adequacy levels they currently hold in reserve.
Close to two in four firms declined to give a response, among which were large life offices such as Aviva, Prudential, Scottish Widows and Zurich. Axa Wealth, Standard Life and Hargreaves Lansdown were among others to refuse to offer a response.
In a video interview with FTAdviser, Jon Cudby, Money Management’s editor, said the results could tell their “own story” about the preparedness of firms for the rule changes, which could see a minimum requirement of £20,000 imposed and far higher for those holding non-standard assets.
Originally proposed more than a year ago, the draft rules would require firms to hold a minimum of £20,000 - up from £5,000 previously - with the final figure based on assets under management, with a surcharge for non-standard assets. Controversially, non-standard assets would include commercial property under the current drafting.
The Financial Conduct Authority has proposed that as many as 20 per cent of firms may not be able to meet the new rules and may leave the industry.
Mr Cudby said: “Broadly those that answered [the question] were prepared, but it’s quite telling that 38 per cent chose not to answer the question at all.
“Quite often they were smaller players that might not have the resources, but there were some big names including Hargreaves Lansdown, Scottish Widows, Prudential and Zurich that all chose to answer, which might tell its own story.”
Of the 29 providers that offered a response, 22 said they had the requirement at least 100 per cent covered. Two other firms said they were currently at more than 90 per cent, while another one was at 85 per cent and one at 83 per cent.
Respondents were also asked how much of their book is made up of non-standard assets. Of the 34 firms that answered this question, close to two-fifths had less than 10 per cent, while only one said it holds more than 50 per cent.
The highest proportion was held by Taylor Patterson, which holds 60 per cent non-standard assets but says it is 100 per cent covered under the proposed capital adequacy rules.
Non-standard assets would seem to pose the biggest capital adequacy conundrum for Lifetime Sipp, which said 44 per cent of assets are non-standard and it is only 33 per cent covered against the proposed rules. Similarly, Rowanmoor Pensions said 40 per cent of assets are non-standard and it is 50 per cent covered.
