The figures, obtained following a Freedom of Information Act request by Sipp industry veteran John Moret, show that 74 “smaller” Sipps at February 2015 had total assets of £27bn and of this figure just £1.24bn of assets were ‘non-standard’.
Data were not available for the whole industry due to the costs involved in collating the information. However, Mr Moret said the numbers indicate the amount of non-standard assets in the Sipp market overall would be less than 1 per cent.
His own analysis of the Sipp market, which covers 89 providers, estimated that the top 20 providers look after a little more than 80 per cent of total assets.
“That’s just over £120bn out of a market of circa £150bn. The remaining 69 providers look after £27bn – so very close to the FCA figures.
“The really interesting data is that which shows that the potential non-standard investment categories total £1.24bn, i.e. less than 5 per cent of the total assets of the 74 providers and under 1 per cent of the total market.
“Obviously the bigger providers will have some exposure to the non-standard investments, but I’d expect the percentage to be smaller.
“So the real question that the data provokes is whether the new FCA capital requirements regime was a proportionate response to the risks posed by these holdings? I’d suggest it wasn’t.”
New capital adequacy rules confirmed last year and which come into force in 2016 will require Sipps to hold more assets in reserve to protect against potential failure, with the actual figure based on an assets under management charge with a surcharge for ‘non-standard’ assets.
The FCA’s data for non-standard assets show the £1.24bn is broken down into £220m in overseas property, £320m in unquoted shares, £220m in unregulated collective investment schemes and £480m in other non-mainstream assets.
The FCA’s data for standard asset classes includes £2.7bn in cash, £2.5bn in insured funds, £9.9bn in unit trusts and Oeics, £3.1bn in quoted equities and £3.1bn in UK commercial property, which was originally proposed as a non-standard asset but was re-designated in final rules.
There have been concerns over the formula the FCA is using, with many warning that the assets under management calculation failed to address risks with esoteric assets. In particular, some said the FCA should have applied a calculation based on the number of assets held rather than value.
At the end of January, FTAdviser revealed that trade body the Association of Member-Directed Pension Schemes was unsuccessful in obtaining permission for a judicial review over the new rules.
Greg Kingston, head of marketing at Suffolk Life, told FTAdviser: “We already know the regulator knows about the concentration of poor investment business on a number of providers.
“I would expect the 5 per cent figure is not representative of the number of investors holding these assets, which would be at least a double percentage.”
He added that the figures are a “good thing” as it means the “impact to the good parts of the market will be less”.
Neil MacGillivray, chairman of the Association of Member-Directed Pension Schemes and head of technical support at James Hay Partnership, added: “This figure is not surprising as it ties in with the research we did with our members.
“We challenged the cap ad rules but the FCA says whichever formula is used there are winners and losers. We tried to change the use of assets under administration but we were unsuccessful.
“We need clearer guidance and greater clarity on valuing those assets. There are lots of questions still with commercial property - does it have to be fully registered within 30 days? There are a list of things that need clarification.”
donia.o’loughlin@ft.com
