Self-invested pension provider Suffolk Life has signalled a move away from growth via Sipp book acquisition, stating that too many plans have ‘unacceptable’ assets on their books especially in light of looming capital adequacy changes.
While the Sipp provider, which now administers almost 25,000 self-invested plans with a value in excess of £8bn, has not completely ruled out further acquisitions, the provider said it will now be focusing on taking on more sustainable business through “organic” growth.
As a result of a change in direction, Chris Jones, Suffolk Life’s strategic partnership director, responsible for Sipp acquisitions, has decided to leave the business.
There has been much speculation around consolidation within the Sipp market, although this has not materialised on the scale expected in recent years. A flurry of acquisitions did, however, follow the confirmation of new rules on capital reserves.
Providers will from next year need to hold a minimum of £20,000, with the final calculation based on the assets held with surcharges for esoteric or ‘non-standard’ assets that are more costly to wind down.
Murray Smith, director at Mattioli Woods, previously told FTAdviser the slow pace of buyouts is about to change and this will happen over the next 12 months as providers simply can no longer bury their heads in the sand.
Mr Smith said: “Some people think there will be a reprieve, but some businesses do not have the resources to do it.”
In the past four years, Suffolk Life has completed four acquisitions of Sipp books, including Pearson Jones in 2013. The firm said it believes it is already seeing organic growth, as it has taken on 1,700 new plans in the first four months of this year.
The increased growth is attributed to strong demand for drawdown ahead of the new pension freedoms, as well as “closer alignment” with fellow Legal and General subsidiary Cofunds. Suffolk Life administers the Cofunds Pension Account.
Will Self, managing director of Suffolk Life, said: “While we will continue to consider any opportunities that present, we are ceasing pro-active acquisition of other Sipp books.
“In the past 18 months we have reviewed a number of opportunities and have found that the quality of business available either cannot be assessed to our satisfaction or isn’t aligned to the type of business that we’re prepared to accept.
“During some of our previous acquisition work, it became clear that no matter how forensic the pre-due diligence we would still find previously unknown and often unacceptable assets within plans, ultimately leading to us having to refuse the transfer and disappoint the investor and adviser.”
Following last year’s radical Budget, John Moret, a Sipps expert and principal of consultancy Moretosipps, told FTAdviser that the Sipp market will benefit from the radical changes in particular because Sipps are ‘expert’ in drawdown.
Mr Moret told FTAdviser that the new pension freedoms could see the Sipp market double in size, adding £150bn in assets by 2017.
donia.o’loughlin@ft.com
