FCA confirms latest Sipp rules delay amid property debates

The Financial Conduct Authority has once again delayed its publication of its capital adequacy requirements paper for self invested pension providers as debates continue over the classification of commercial property as a non-mainstream asset.

As revealed by FTAdviser, both the final capital adequacy rules and the findings of the regulator’s third thematic review were expected to be published at the end of next month.

Speaking at the Association of Member-Directed Pension Schemes’ annual conference in London yesterday, Nick Poyntz-Wright, director for long-term savings and pensions at the FCA, revealed the publications will not be published until the third quarter of 2014.

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The capital adequacy paper is now over a year overdue. The policy statement confirming final rules was expected by some to be published at the beginning of May 2013.

Under proposals published by the FCA in November 2012, Sipp providers would be required to hold a minimum of £20,000 in reserve, compared to just £5,000 currently.

They would also have to hold proportionately more capital depending on the underlying investment spread, with non-mainstream assets - including, controversially, property - requiring a higher percentage to be held in reserve.

In 2012, the FSA produced a list of standard assets; all assets not on that list will be non-standard. AJ Bell highlighted that one point of friction in the consultation will undoubtedly be the make-up of the standard assets lists, particularly the absence of commercial property.

The standard assets list includes: cash, cash funds, corporate bonds, exchange traded funds, government and local authority bonds and other fixed interest stocks, structured products, investment trusts, managed pension funds, open-ended investment companies, permanent interest bearing shares, real estate investment trusts, listed shares and unit trusts.

Mr Poyntz-Wright said the FCA is reconsidering the classification of commercial property and considering phasing in the new capital adequacy requirements over a set period of time.

This will undoubtedly please market commentators who have questioned why commercial property should be marked as a non-standard asset.

Previously, Billy Mackay, marketing director at AJ Bell, said: “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.”

The third Sipp thematic review, revealed by FTAdviser in October 2013, will specifically focus on Sipp operator financial resources, the quality of business Sipp operators allow within their schemes and “operational procedures and controls”.

Neil MacGillivray, chairman of Amps said: “Although disappointed at the further delay to the capital adequacy consultation paper, we are reassured that two of Amps key concerns are being addressed. If the aim is to get this right first time, then it is worth waiting for.”

There have also been calls to move to a permitted investment list, following recent Sipp scandals and the FCA warning about unregulated investments.