The Financial Conduct Authority is under growing pressure to re-think plans to link Sipp capital requirements to a firm’s assets under administration after a Freedom of Information request revealed “minimal” industry support for the proposal.
The regulator is currently consulting on proposals to change the basis of the capital adequacy calculation from expenditure to assets under administration.
In addition, the regulator wants to raise the minimum amount of capital a Sipp administrator needs to hold from £5,000 to £20,000.
Amps has obtained 55 of the 57 industry responses to the consultation through a FoI request. It says while there was “strong backing” for extra consumer protection, there was “minimal support” for the formula the regulator has proposed.
Amps chairman Andrew Roberts says, as an interim measure, the FCA should raise the minimum capital level to £50,000. He says the regulator should then carry out more detailed analysis of the appropriateness of basing Sipp capital requirements on assets rather than expenditure.
Roberts says: “The rules do not need to be over-engineered and simplicity has its advantages. The final outcome should present prudential requirements that do not needlessly force out well-run Sipp firms.
“The FCA has an unenviable task in settling on a system that will be fit for purpose in years to come but will be under pressure to increase current requirements.
“I suggest that every Sipp provider is mandated to move to 13 weeks’ expenditure as an interim measure, with a minimum of £50,000. This would provide higher consumer protection than is already in force.
“The FCA can then explore whether there is any need to increase the capital requirement above this level, or move from expenditure to turnover.
“If evidence shows that consumers are not sufficiently protected at the new level, they should investigate a formula having regard to the number of in force Sipps and the nature of the underlying investments.”