New rules that will hike the amount of capital self-invested pension firms must hold in reserve were finally confirmed today (4 August), as the regulator concluded a year and a half of deliberations by revealing an about-turn on commercial property and a reprieve for smaller firms.
In the policy statement, the Financial Conduct Authority said gold bullion, National Savings and Investment products, bank account deposits, units in regulated collective investment schemes and, importantly, UK commercial property have all been added to the standard assets lis.
This latter represents a major shift change from previous assertions that it would be kept as a non-standard asset and follows intense lobbying from Sipps firms who argued that the move to force them to classify it in the same bracket as unregulated investments was draconian.
Debates over the position of property, as well as over the fate of small firms amid concerns over consolidation, had delayed a paper that was initially due in mid-2013 following the publication of draft proposals in November 2012.
Today the FCA also confirmed it has responded to concern over the burden on smaller firms - around a fifth of the industry had been expected to close due to the new rules - as it confirmed the ‘initial capital requirement constant’ has been adjusted to “smooth the impact on smaller firms”.
It said this will “mean a significant reduction from the capital requirements we consulted on for most firms who administer less than £200m of pension assets”.
FTAdviser previously revealed the regulator was in talks with larger Sipps firms amid fears that not all books of business left behind would be bought up.
Another change from the FCA’s consultation paper is that the initial capital requirement calculation should now be based on the assets under administration over the last four quarter-ends rather than at a set point in time, “reducing the compliance burden on firms”.
The FCA has also confirmed that the fixed minimum capital required is to be £20,000, as first proposed. The new rules will come into force on 1 September 2016.
Nick Poyntz-Wright, director of long term savings and pensions, said: “Under the current capital requirements we have a real concern that when a Sipp operator exits the market people’s pension savings could be put at risk.
“The new rules we have put in place will help to ensure that firms carry sufficient capital to fund an orderly closure without having a knock-on impact on consumers’ pension pots.
“We have listened to the industry since our initial consultation and made a number of changes to proposed rules to ensure that they will work for better for firms helping to ensure that consumers get the best protection for their pension savings.”