FSA set to increase cap-ad requirement for Sipp firms

The FSA is preparing to increase the capital adequacy requirement for Sipp providers in a bid to protect investors as the products become more popular in the mass market.

Money Marketing understands the FSA has begun sounding out Sipp providers about its plans to increase the level of capital they need to hold.

Currently, Sipp providers are required to hold reserves equal to at least six weeks of annual audited expenditure.

The FSA declined to comment.

Hornbuckle Mitchell is searching for a strategic partner to inject capital into the business amid concerns the new solvency requirements could stall the company’s growth plans.

The Sipp specialist has appointed Hines Consulting to search for potential investors. The process is expected to take three to six months.

Managing director David White says: “I think the FSA would like to see the number of Sipp providers reduce from 120 to about 20, so we need to ensure we are in a position to be in that remaining 20.

“We are looking for a strategic partnership, this is not a sell and dismantle job.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “Sipps have become a mainstream product, so it is understandable the FSA wants to increase the regulatory standards for providers. This is likely to put pressure on the smaller, niche Sipp operators.”