Advisers concerned about September’s capital adequacy requirements

Published: 15 Apr 2016

More than two out of five retirement advisers are concerned that a SIPP provider they use won’t be able to meet September’s capital adequacy requirements, our recent research shows.

The study – issued five months before new capital adequacy rules basing solvency requirements on the proportion of standard and non-standard assets held by SIPP providers come into effect – found 45% of advisers are concerned about providers meeting the rules.

They are also concerned about the implementation of the rules – 63% of financial advisers want more clarity on non-standard SIPP investment rules from HMRC and the FCA. In addition, the importance of SIPPs as a planning tool for non-standard pension investments was cited by 33% of respondents and the flexibility to take on non-standard investments was also cited by two out of five advisers as being important to either them or their clients.

Under the capital adequacy rules, commercial property held in a SIPP is to be classed as a ‘standard asset’. Previously, the regulator had classed commercial property as a ‘non-standard’ asset. Our research further shows that 36% want more clarity on specific property transfer rules.

Stewart Davies, Group CEO said: “The fact that so many advisers are worried about the ability of their SIPP provider to meet September’s capital adequacy requirements is concerning.

“Not only will this impact their confidence in their particular adviser, it will potentially cast a shadow over the entire industry and highlights the need for SIPP providers to work closely with advisers to ensure they have the knowledge and tools available to provide clients with detailed, legislative-secure advice.

“In addition, we will see the issue of non-standard SIPP investments rising in importance over the next few months. Our research clearly shows that advisers need clarity on non-standard investments, and they need it now. With SIPPs being increasingly seen as a vehicle for the planning of non-standard pension investments, this clarity is needed as the industry looks ahead to the introduction of the new capital adequacy rules in September.”

The new capital adequacy rules also state that:

  • The fixed minimum capital requirement for SIPP operators is to be set at £20,000
  • Capital surcharge is to be applied for firms holding non-standard assets.
  • Physical gold bullion, national savings and investment products, bank account deposits, units in regulated collective investment schemes and UK commercial property are to be classed as standard assets

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