Pensions  

Sipp survey special report: Just capital?

  • Grasp the importance of engaging with providers about their performance
  • Gain an understanding of Sipps and how new rules are likely to affect them in future
  • Learn to use data from the survey for further understanding
CPD
Approx.40min

The rules subsequently came into force on 1 September, and there has been an increase in the number of firms disclosing figures. But there remains a number of notable holdouts, including The Lifetime Sipp, Sippchoice and Taylor Patterson.

It should be noted that the table has been altered in this edition, removing those who are not subject to the specific Sipp operator capital adequacy rules, such as insurers. 

For those that are still included, we have asked for more details of how they meet these requirements. Each provider was asked to break down their holdings into Tier 1 capital (cash and reserves) and Tier 2/3 capital (debt, preference shares and other forms of funding). While there is nothing intrinsically inferior about Tier 2 capital, its use may indicate that a company has borrowed money  to conform with the rules. 

The table indicates that the vast majority of providers rely solely on their own balance sheets, but advisers should not shy away from asking questions about providers’ financial stability if they have any concerns.

The new requirements’ repercussions filter out through many of the other findings in our survey. The rules place a greater capital burden on those holding non-standard assets, but the table shows there has been no wholesale change to practices since 1 September. Some providers no longer permit non-standard assets of any kind.

James Hay, DP Pensions and Nigel Sloam (operator of the NSS Sipp) are among the latest to have taken this route over the past few months. However, existing business remains on the books, and for every provider that has seen its proportion of non-standard assets fall, there is another for whom the balance has stayed the same, and some have even increased their focus on this area. AtSipp’s allocation has fallen from 10 per cent to 7 per cent, for example, but IPM’s has risen from 12 per cent to 14 per cent.

 

Charges

Table 2, showing providers’ charges, is one area in which change may have been expected. Some commentators expected fees to rise as a result of the new rules, but as with the October survey, this year’s findings suggest little change so far. 

Where fees have risen, many have crept up in line with inflation. In some cases, fees have fallen, as in the case of Rowanmoor’s transfer charges.

One notable difference in this year is not fully reflected in the table: a number of firms have stopped accepting in-specie contributions as a result of an HM Revenue & Customs crackdown (see page 21). Mattioli Woods is among those to have called for “a sensible end to the in-specie contribution saga, with straightforward transactions getting tax relief” in its survey response.