The FCA has changes its guidelines on how operators of self-invested personal pensions (Sipps) deal with commercial property and their capital adequacy requirements.
The clarification has been widely welcomed, specifically with regard to the 30-day rule for commercial property. The rule as it stands – which will come into force in September 2016 – is that any asset that can not be sold or transferred within 30 days would be deemed non-standard. However, there was no mention of when the 30 days starts. The regulator
has now clarified that the asset should be considered to have been realised at the point that the Land Registry is formally notified. The FCA added, “We clarify that responsibilities and expectations around valuations and due diligence are line with previous FCA guidance.”
But Martin Tilley, director of technical services at Dentons, disagrees. He said, “All the FCA has done is stirred the pot again. [The property is] standard or non-standard unless you have reason to believe it can’t be done in 30 days. The Sipp industry has gone to the FCA and asked for some constructive guidance, and they have said ‘no’.
“The Association of Member-Directed Pension Schemes (Amps) can help, but there is such divergence within the industry. The FCA were trying to help the matter along but I don’t see that they have done at all. All they seem to have done is put emphasis on the word ‘capable’,” he added.
As such, Dentons has categorised some of its properties as non-standard because it is aware there are some outside parties involved in the properties so the process would take more than 30 days. Mr Tilley says Sipp providers now have the opportunity to say that, if the consultation goes through as it is, they might be able to classify more properties as standard.
Having more properties as a standard asset can potentially reduce a provider’s capital adequacy requirement. As it stands, providers will have to hold at least £20,000 in reserve by 1 September 2016.
Mr Tilley added that what he does not want to see in the industry is differentiation between providers in how they are dealing with the rule. “This can’t go on. We need certainty. There’s a short consultation period so what I’m hoping to see is providers responding and saying we need clarity from the FCA.”
As well as the commercial property rule, the paper stated that the standard list only allows shares traded on the Alternative Investment Market (Aim), the London Stock Exchange or recognised overseas investment exchanges, but it has been proposed to expand to all securities admitted to trading on a regulated venue. This means an exchange that is authorised by a financial regulator or government agency, although it is not restricted to the European Economic Area.