Sipp provider predicts firms will fail to comply with rules and exit

A Sipp provider has predicted a number of competitors will exit the market because they will fail to meet new requirements. With changes announced in August by the FCA on capital adequacy rules, City Trustees believes the number of firms providing Sipps could shrink.Mark Smith, head of compliance at City Trustees, said: "With numerous Sipp providers already trading on thin margins, many may not be able to comply with the new requirements."We expect some Sipp providers will exit the market, potentially leaving clients' pension savings at risk. In order to stay solvent, other providers may need to dramatically increase standard scheme fees, which will affect all clients not only those who elect to invest in non-standard assets."The industry now needs to instil a strong compliance culture to protect clients' assets, and demonstrate that it can regulate itself in line with FCA expectations".{desktop}{/desktop}{mobile}{/mobile}City Trustees, part of Mattioli Woods, also said it disagreed with the call for a permitted investment list. It believed that additional and ongoing due diligence is required for non-standard assets.Ed Carey, City Trustees managing director, said: "With the FCA's capital adequacy review, many Sipp providers are refusing to consider accepting non-standard investments in a pension scheme. This flies in the face of one of the key attractions of a Sipp; its ability to hold a wide range of investments."As a provider, we have a very open attitude to investments that are presented to us by our IFA partners. However, as co-trustee we have a duty of care and a responsibility to our members to ensure any investments fully meet HMRC guidelines. For this reason, we need to check the adviser has assessed the suitability of a non-standard asset within the Sipp, as well as completing our own due diligence".The new rules on capital adequacy for Sipp operators will come into effect in September 2016. The minimum capital requirement for Sipp firms will be £20,000, rising from £5,000.The key changes include:- The initial capital requirement calculation should be based on the assets under administration (AUA) over the last 4 quarter-ends rather than at a set point in time. The FCA said this will reduce the compliance burden on firms and help avoid fluctuations in capital requirements- The initial capital requirement constant has been adjusted to smooth the impact on smaller firms. Officials said this will mean a significant reduction from the capital requirements the FCA consulted on for most firms who administer less than £200m of pension assets- Gold bullion, National Savings and Investment products, bank account deposits, units in regulated collective investment schemes and UK commercial property to be added to the standard assets list

Sipp provider predicts firms will fail to comply with rules and exit

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