PensionsDec 4 2015

FCA updates Sipp capital requirements

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FCA updates Sipp capital requirements

The regulator has issued further clarification surrounding the use of commercial property in a Sipp.

The watchdog explained in its FCA Handbook Notice 28 that, when an asset – in this case commercial property – is capable of being readily realised within 30 days, a firm should consider whether the transaction can be concluded within that time limit in the ordinary course of business.

It gives an example, “Such a date can be the date of change of contracts or any other date when both parties have unconditionally agreed to undertake their contractual obligations to realise the asset.”

It concludes that assets can still be considered standard if the realisation time period goes beyond the permitted 30 days due to delays in receiving information from third parties. The FCA has amended its sourcebook to include examples for delays due to “outstanding third-party permissions”.

On the further update, Greg Kingston, head of communications and insight at Suffolk Life said, “It sounds like a get out clause to me. Everyone seems to be fatigued and exhausted by it. Providers now just need to get on with it.” He added that the regulator has already announced that it will review the market after a year of the capital adequacy requirements to see if firms are sufficiently capitalised, and if not, then we will find out its plan of action. Currently, there is no explanation of what will happen should a firm be insufficiently capitalised.

Mr Kingston added he does not believe there will be any further changes when it comes to Sipp providers’ capital adequacy requirements, but there may be some guidance notes to help providers prepare as it becomes closer to the September 2016 deadline.

Further, the FCA said a DFM portfolio can also be classified as standard as long as the Sipp operator has arrangements in place to ensure the portfolio comprises standard assets only.

The FCA said it had also received industry proposals to include crowdfunding and peer-to-peer assets on its standard asset list. It admitted it explored these as a possibility but “did not obtain convincing evidence” that the market has the necessary characteristics that standard assets should have. This may be reconsidered in 2016 when the regulator undertakes a full market review of the industry.