New capital adequacy rule for self-invested pension firms would have forced Ashcourt Rowan to hold 600 per cent more capital in reserve against the small book of business it inherited through a buyout last year, and that it exited via a sale that was announced this morning (11 August).
Mattioli Woods subsidiary City Pensions Ltd has acquired the personal pension book from Ashcourt Rowan subsidiary UK Wealth Management Ltd for a total cash consideration of up to £355,000.
Ashcourt Rowan inherited the business at the end of last year through the £14.2m acquisition of UKWM.
The deal follows Dentons announcement at the end of last week that it had acquired the Sipp book of MAB Pensions Ltd for an undisclosed sum, and comes amid the latest predictions of consolidation across the sector.
Mark Smith, Mattioli Woods operations director, told FTAdviser: “I did a quick calculation on this one, looking at what Ashcourt Rowan’s position would be based on that book of business. The capital requirement would have increased from something like £28,000 to about £200,000.
“If you multiply that onto bigger businesses they’re the kind of increases that will drive consolidation in the marketplace.”
Jonathan Polin, group chief executive of Ashcourt Rowan, told FTAdviser that the Sipp and Ssas schemes acquired with UKWM were non-core to the business and the sale follows that announced last April of the firm’s own £300m Sipp and Ssas business to Mattioli Woods.
“I think you need to have critical mass to make it worthwhile, so we would have had to invest quite a lot of money in it to get up to the standard we would want, or we could sell it to someone like Mattioli Woods, which has the scale and systems to make it work.”
Last week, the FCA published its final long-awaited capital adequacy rules which confirmed Sipps providers will need to hold a minimum of £20,000 in reserve, with the exact figure based on a calculation of assets under management with a surplus added for ‘non-standard’ assets.
Having said its original proposals could force as many as one in five firms exit the sector, its revised proposals reduces - and in some cases halves - the £20,000 minimum for smaller firms with less than £200m in assets, and reclassifies UK commercial property as a ‘standard’ asset.
The regulator now predicts that one in ten firms will be forced out of the sector as a result of the changes.
Some providers, such as Dentons, believe this is an underestimation and that the severe hike in reserves such as that which would be been required by Ashcourt shows the FCA’s original estimate of 14 to 18 per cent exiting the industry still stands.
Speaking to FTAdviser, David Fox, Dentons’ director of sales and marketing, said: “My feeling is that it will be more around the 14 to 18 per cent mark over the shorter term which is what the FCA originally said.
“But it’s a question of timescales in how quickly it will happen. People will think, ‘this is not for us’. They don’t have the financial resources in place, or they may think about this over a period of time.
Mr Fox said longer-term consolidation could even rise above the original FCA estimates.
