Of the estimated 120 SIPP providers in the market, Suffolk Life anticipates that not all will have the assets required should the FSA change the capital adequacy requirements to two years. As a result, significant consolidation in the SIPP market is to be expected to commence in 2012.
With more than 800,000 SIPP holders currently in existence and Suffolk Life estimates of an average growth of 30 per cent per annum since A-Day, recent comments from the FSA indicate that they believe providers’ book levels are too low.
They have proposed plans to link capital adequacy requirements to the complexity of a firms’ business. The requirements are expected to be increased from six weeks to up to two years, with those providers dealing with investments at the more complex end of the SIPP spectrum hardest hit.
Chris Jones, Product and Marketing Director at Suffolk Life, remarks, “In 2012 SIPP providers are being faced with further regulatory scrutiny from the FSA and HMRC. In the pipeline are the FSA’s ongoing thematic review, UCIS review and proposals for increased disclosure. HMRC is reportedly taking a closer interest in scheme reporting, record-keeping and at the same time there are changes for the abolition of protected rights, which will see SIPP providers having to amend their illustration systems and literature. Further to this, there’s the continuing flow of other illustration changes arising from RDR, SMPI rules and the Test Achats European Court judgement.
“A number of providers, particularly those for whom SIPP administration is not a core service, are evaluating their business models and looking at alternative options to de-risk their regulatory exposure. The specialist providers that have the financial strength, robust systems and strong corporate governance infrastructure demanded in today’s market are both best placed and most interested in this sector.
“Market consolidation is therefore the only viable option for many in the SIPP sector as they seek to battle against increased regulatory scrutiny and pressure from advisers.”
Source : IFA Magazine