Could new SIPP rules be on their way?
The FSA have given their biggest indication yet that they will not ban – de-facto – certain types of esoteric investments that can, at present, be held in a SIPP. Keeping faith with the idea that these are, indeed, Self Invested PP and therefore self-determined! There does seem to be some confusion, however, as to what an esoteric investment is – just because something is branded as esoteric it does not necessarily mean that it is a UCIS – although the point made about potential risk, opaqueness and governance aspects are often true for all. Intelligent Partnership does not offer Financial Intermediaries any UCIS investments and promotes only best-in-class esoteric investments supported by ongoing due diligence. But, as this article goes onto explain, pressure is being brought to bear upon the ‘gatekeepers’ to esoterics – the SIPP Providers – in other ways. We welcome the opportunity this presents to drive certain kinds of very poorly conceived esoteric ‘investments’ out of the market place and away from people’s retirement plans, within which a large proportion should have no place.
The FSA is considering forcing SIPP providers with riskier investments to hold more capital than those with less risky assets under proposals to be outlined later this year.
In June last year, Money Marketing revealed the FSA was planning to increase capital adequacy requirements for SIPP providers. Currently, providers are required to hold capital reserves equal to at least six weeks of annual audited expenditure.
Speaking at the Association of Member-directed Pension Schemes annual conference in London today, FSA pensions and investment policy manager Milton Cartwright said Sipp providers who hold more risky esoteric investments are more difficult to wind-down than those with less risky assets. He said: “It seems to us that the problems in orderly wind-down that we have encountered in the last couple of years have largely been as a result of the types of asset that the SIPP operator in question has held within a SIPP.
“There is a very strong correlation between the more esoteric types of asset that are held and the ability of a firm to wind-down in an orderly manner. Six weeks has certainly proved inadequate. “One of the things we are looking very carefully at is the amount of assets held within the SIPP that are esoteric.” Cartwright said while the regulator would not ban any particular asset from SIPPs, providers should consider the risk of reputational damage if investments fail.
He said: “Frankly, SIPP operators are holding more UCIS investments than any other type of provider. “There is a reputational issue for the SIPP industry here. These investments are quite often high risk, carry opaque risks and have low governance requirements”.
Mr Cartwright went on to say “But we are not in the space of stopping people investing in what they want to.”
Original Article : Money Marketing
By Tom Selby