Pensions - Articles - FSA publishes proposals for SIPP operators


 The Financial Services Authority (FSA) has published a consultation paper outlining how much capital Self Invested Personal Pension (SIPP) operators must hold in future.

 The proposed regime reflects the growing popularity of SIPPs as a way to invest, the wide range of assets that can be placed within them, and will help protect consumers should the operator have to be wound down.

 The absolute minimum capital a SIPP operator must hold will increase from £5,000 to £20,000 because experience has shown the cost of winding down an operator is unlikely to be less than this amount.

 In addition to the minimum capital requirement, the FSA is proposing that an operator’s total capital requirement should take into account two further key elements:

     
  •   the amount of assets under administration (AUA); and
  •  
  •   an additional capital surcharge for operators that hold non standard asset types (i.e. assets that will take longer to deal with during a wind down).

 Broadly speaking, the more assets an operator holds the more capital it will need - but this will only apply up to a point. While the FSA recognises that higher AUA also means greater potential risk for investors, it also offers an economy of scale in that SIPP operators can transfer some schemes (with the same assets) in bulk. See Figure 1 in the consultation paper for further explanation.

 An additional capital surcharge will be applied where the operator holds non-standard assets (such as some Unregulated Collective Investment Schemes) because they will take longer to transfer in a wind-down situation. Non-standard assets can be identified by referring to a list of defined standard assets (see Notes to Editors 2).

 Finally, the FSA is also proposing that core capital must be held in a form that is realisable within a year, while capital held against the surcharge must be realisable within 30 days.

 David Geale, the FSA’s head of investment policy, said:

 “While the SIPP market has grown substantially over time, the capital regime has not changed and needs bringing up to date. These proposals reflect the volume, range and complexity of assets now being put into SIPPs and – ultimately – will protect investors better in the unfortunate event an operator is wound down.

 “Put simply: the more assets you have under administration – the more capital you will need; and if some of those assets happen to be more risky you will need even more.

 “We believe these proposals are pragmatic and proportionate, but this is a consultation so we want to hear from the industry and consumer groups to ensure they are also balanced.”

 The FSA recognises that the proposals will require some operators to raise significant new capital, so there will be a transitional period of one year between the publication of final rules and implementation. The consultation closes on 22nd February 2012.

Back to Index


Similar News to this Story

94 percent view State Pension as an entitlement not benefit
Majority of adults aged 66+ say that Triple Lock is affordable and fair to older generations. Around one in seven rely on the State Pension to provide
Fair play off the pitch
Male players in the English Premier League earn an average of more than £3 million per year, while their female counterparts average around £47,000. T
Why Bitcoin matters to Pension Schemes
Back in November 2024, Cartwright Pension Trusts announced its role in facilitating the first-ever UK DB pension trust investment in Bitcoin. With the

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.