A report detailing adviser concerns around preparedness for capital adequacy has led to calls from industry experts for a redefinition of the self-invested personal pension (SIPP) that better reflects trends in the market.
A report from Momentum Pensions, which questioned 101 financial advisers, found that 45% of specialist retirement advisers are concerned that their SIPP providers will not be able to meet the requirements.
The rules, to be implemented in five months’ time, state that the minimum capital holding needed to trade in SIPPs is £20,000 and providers will be required to set aside further funds depending on the volume of non-standard assets.
The report is likely to be referring to the sort of non-standard SIPPs traditionally bought off-platform from specialist boutique advisers, but if it is also assessing the 80% of SIPPs now bought on-platform and holding standard funds such as listed securities, OEICs, unit trusts and ETFs, these concerns seem unfounded.
It is this confusion between ‘vanilla’ and non-standard SIPPs that has led to commentators such as FinalytiQ director Abraham Okusanya to call for a new definition.
“We need to see a distinction between these two very different products because the financial viability of specialist SIPP providers is of concern, while that of standard platform SIPP providers is not,” he said.
He explained that bespoke SIPP providers are facing difficulties: “We are currently preparing a report on the subject and have received details from 20 of 40 such providers. Their capital adequacy requirements have increased by between 70% and 800%.
“Some 60% of these providers are viable on an ongoing basis while 40% are not and are likely to be trying to sell their books over the coming months.”
Dentons director of technical services Martin Tilley said: “There will be some consolidation, there are currently two or three providers in the market looking to sell client banks.
“I can’t reveal details because I am under a non-disclosure agreement, but a distinct minority will be unable to manage the September deadline.”
Some bespoke SIPP providers have changed their model from non-standard to standard in part because of the requirements first mooted by the regulator in 2012.
Talbot and Muir is one such provider. Head of technical support Claire Trott said: “Historically we were a non-standard SIPP provider but as a result of lack of interest and the expense around checking the value of non-standard investments such as unquoted shares, we pulled out of the market in August 2014.”
She added: “All the big players will have checked and double checked their financial viability. Advisers using SIPPs with them should have no concerns.”
Okusanya added that the financial viability of SIPP providers should be of less concern for advisers who are following the appropriate due diligence requirements.
“This should be one of the top-three concerns when choosing a SIPP provider.
“Accounts information is available on Companies House and should be thoroughly checked before a product is recommended to a client.”
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