Capital adequacy requirements have been one of the most talked-about topics in Sipps for years, and the 1 September deadline for providers is swiftly approaching.
The date has been etched in providers’ minds since the FCA first released its paper looking at the allowance of non-standard assets and the requirements Sipp providers will have to meet to have capital in reserve.
According to recent research by Momentum Pensions, 54 per cent of 106 advisers surveyed are concerned that a Sipp provider they use will not be able to meet the regulator’s requirements. The survey results also showed that
55 per cent of advisers had faced unexpected charges from their provider.
But one of the biggest questions on Sipp providers’ minds will be what happens if a company does not meet its capital adequacy requirements.
Murray Smith, sales and marketing director at Mattioli Woods, said, “We don’t actually know what will happen. The industry has buried its head in the sand for so long thinking that it won’t happen. But now, like Brexit, we are having to face it.”
The FCA has yet to make a statement detailing its contingency plan for firms that fail to meet the requirements.
For years there have been rumours of consolidation, and although some mergers have taken place – notably Curtis Banks’ purchase of Suffolk Life earlier this year, followed by Hornbuckle’s parent company, Embark Group purchasing Rowanmoor in July– the numbers have been nowhere near as high as anticipated. Why is this?
Mr Smith believes the closer we get to the deadline, the more we will have providers waiting to see what happens. It is all about timing, he said, adding that if you were planning to sell your business before the deadline then the time has come and gone.
Mr Smith added that if a company has not met its requirements, the reason may be less to do with their non-standard assets and more to do with tax liabilities. He said if there are liabilities that the provider cannot pay, the firm could go bust.
“It would not be good for the name of the Sipp industry. This needs to be managed by the regulator and by the industry,” he said.
