Likelihood of new capital adequacy rules will push many that form the industry’s “long tail” to pull out of market.

An increasing attrition rate among self-invested personal pension providers prompted by likely new rules in relation to capital adequacy requirements could reduce the market by a third over the coming years, according to industry veteran John Moret.

In a video interview with Financial Adviser senior reporter Aamina Zafar, Mr Moret, who is founder of consultancy MoretoSipp and was formerly marketing director at Suffolk Life, said that his own ongoing research – he has for many years compiled a ‘survey of surveys’ on the market – put the number of providers currently at more than 100.

However, he said that the vast majority, around 80%, of the SIPPs in force in the market were operated by “five or six” providers, with the rest accounted for by a “long tail” of smaller providers.

Mr Moret estimates that there are currently around 800,000 SIPPs in force across the market, with a total value of around £100bn.

Describing this number as “probably too many”, he predicted that looming changes to the sector that are likely to come out of a forthcoming regulatory review could prompt many providers to pull out of the market or consolidate.

In particular he highlighted that the mooted changes to capital adequacy requirements that could dramatically increase the amount of capital a provider must hold in reserve would be a key factor in prompting many smaller firms to seek an exit.

There has been some debate in recent weeks over the potential changes among providers, with some suggesting that hints towards a two-year capital reserve requirement would be overkill while others describe such a move as “quite appropriate”.

To see the full video interview, including a discussion on supposed ‘mis-selling’ of Sipps, click here.

Source : FT Advisor