Surge in Sipp M&A to continue ahead of cap ad rules

Surge in Sipp M&A to continue ahead of cap ad rules

Self-invested personal pension providers are expected to consolidate further in the run up to and following the changes to capital adequacy requirements for providers coming in on 1 September.

First announced by then Financial Services Authority in November 2012, Sipp operators have been required to increase the capital they hold in reserve.

The new formula has resulted in a significant increase in capital requirements for Sipp operators whose assets contained the greatest proportions of non-standard assets.

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In January this year, the Financial Conduct Authority revealed it is ready to wind up self-invested personal pension providers who fail to meet capital requirement expectations.

Since then the Sipp market has seen a flurry of M&A activity.

Earlier this month, Hornbuckle parent Embark Group bought fellow self-invested personal pension provider Rowanmoor Group.

Also this month, Talbot & Muir bought the Sipp and Ssas administration business of Attivo Group for an undisclosed amount.

Now, a host of providers have said they expect further consolidations in the industry both in the run up to the new capital adequacy requirements coming in to force and following them, as some providers will not have met their ideal deadlines for increasing their cash levels.

Brian Talbot, founder and director at Talbot & Muir said of the Attivo acquisition’s timing: “That bit of business became available now. [Attivo] had made the decision to move out of non-core and it fits with out timing. It fits in with our plans for organic growth and acquisition.

He added there could be more acquisitions before the capital adequacy rules come into place and shortly afterwards, but was not aware of any “firesale”.

He said: “We are acquisitive for the right book of business. Our experience is where business such as Attivo and Oval want to sell off non-core business.

“We’ve seen bigger players get bigger. Some of the books of business are somewhat distressed, due to high levels of non-standard investment, one or two businesses have admin and resource problems and against the backdrop of capital adequacy bill rising at the start of September.”

Martin Tilley, director of technical services at Dentons said of the firm: “It is unlikely that any announcement on acquisitions will be made before 1 September but we are actively in discussions with a couple of firms about acquisitions.”

Speaking more generally about the market, he said a few Sipp providers are trying to get in before 1 September.

“With Attivo, Sipps are not core to what they do but because the requirements of being a Sipp owner are more onerous, some are derisking their business - they’ve now decided this is the trigger point to disclose that part of their business.

“We have seen several firms waiting to do that but some have misinterpreted the length of time it takes - they have mis-estimated and therefore not left enough time to do it before 1 September.”

Fellow Sipp Curtis Banks has a history of growing through acquisition. Rupert Curtis, chief executive, said his firm’s acquisition strategy is designed to position it as the leading consolidator in the Sipp market. L