FCA refuses rules update as pension property split emerges

FCA refuses rules update as pension property split emerges

Self-invested pension providers spoken to by FTAdviser are taking divergent approaches to commercial property holdings which could have implications on costs for consumers.

Firms are at variance on whether to treat commercial property as a ‘standard’ asset class under new capital adequacy rules, with some classifying all holdings as such and others taking the other extreme of designating all properties as non-standard.

Assets classified as non-strandard will require additional capital surcharges to be held in reserve, which increases the cost of capital and could feed down into client fees.

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According to the FCA’s rules, if the provider believes it would take less than 30 days to transfer the asset then it should be treated as standard, but if it is over 30 days it should be treated as non-standard.

However, whether an asset can be liquidated in 30 days is a matter for firms to assess themselves and many are applying widely different approaches.

The regulator confirmed to FTAdviser that it has no plans to update its stance on commercial property, despite calls for further clarification from several providers and the industry trade body, the Association of Member Directed Pension Schemes.

Neil MacGillivray, chairman at Amps, told FTAdviser that it has asked the FCA for clarification on a number of points. Although they responded, the detail is still lacking, Mr MacGillivray said, adding that the trade body is still “proactively working... to get further clarification”.

“The FCA are unlikely to support standardisation of practice - they don’t like it because they feel it is restrictive. We need further guidance from the FCA - their responses are not detailed enough so what we are doing is getting as much information as possible from them.”

Billy Mackay, marketing director at AJ Bell, said that the firm treats UK commercial property as standard across the board unless there is a particular reason why it should be treated as non-standard.

He said: “We do know that there’s some providers out there who are interpreting the rules differently but we are comfortable treating it as standard.”

Greg Kingston, head of marketing and proposition at Suffolk Life, said that on face value how Suffolk Life operates looks like a contradiction to what the regulator has said, believing it to be a non-standard asset.

“Could it be transacted in 30 days or less? Absolutely - but it cannot be guaranteed”. He said Suffolk Life has taken the “prudent view to treat all commercial property as non-standard”.

He added that he does not think any provider can safely point to a property on its books and say it can be sold within 30 days.

Patrick Van de Steen, managing director for marketing and proposition at Hornbuckle, said that the firm wants to consider property to be a standard asset, however different properties and lease types will have different transfer or liquidity profiles which affects the classification.