When SIPPs were created in Chancellor Lawson’s Budget speech back in 1989, the world was a different place. We were pre-financial crisis, pre-simplification, pre-freedom and choice and less engaged with saving for the long term, in part due to the pensions industry having been dominated by DB schemes.
Fast forward to 2017 and I have to say, I am proud of the industry I have been involved in for so many years. It isn’t perfect, some aspects need to be worked on and improved, but it has evolved at a very fast pace. All in all, UK consumers are more engaged with pensions, thanks partly to Government changes that were positive changes for members, advisers are more highly qualified and there has been more innovation and education to help those saving for their retirement.

The introduction of the new capital requirements for SIPP operators, that came into force just over a year ago, were a turning point for the self invested sector. Some firms that didn’t see SIPPs as core to their business, and didn’t want to keep the additional capital on their balance sheets, chose to sell their books of business.

Other firms took the decision to sell themselves, as they didn’t want to recapitalise, were concerned about some of the assets they had accepted or had older owners/shareholders that just didn’t want to go through the change. IT systems have had to improve massively, some firms just hadn’t invested in this area and to enable them to complete the regulatory returns, investment in this area had to be made.

A large proportion of the independent SIPP industry didn’t welcome the new capital requirements, and many still don’t think it was the right decision as they thought it would stifle innovation of thought and investment choice, which was the whole reason for the establishment of SIPPs in the first place. But looking at the recent information from the FCA, there is only one provider that hasn’t met this minimum requirements, down from four earlier in the year. We should consider this news a positive, not a negative.

Yes, 100% of providers should have been ready, but for only one to be below the capital adequacy requirements is far less than feared. The FCA has stated that they are working with that company to ensure a solution is found. Remember we don’t know why they have not met their capital requirements, all the FOI provided was a number. This could mean they cease accepting any new non-standard assets or there is a capital injection from shareholders. But if a solution cannot be found, and the FCA remain unconvinced that there is a solution, then it may mean a forced sale, as we have seen happen with other firms.

The new capital adequacy requirements have improved and strengthened the industry standards, so that advisers and their clients can have confidence that they are working with well capitalised firms. For existing providers it means that the future needs of an ever aging population can be met with added confidence.

Elaine Turtle is director of DP Pensions