Many Sipp providers are failing to apply for authorisation because they are struggling to meet strict capital-adeq-uacy requirements, says Hornbuckle Mitchell managing director Neil Marsh.
The FSA wrote to the Association of Member-directed Pension Schemes earlier this year expressing its concern at the lack of applications for Sipp authorisation but it has refused to reveal numbers or how many firms it believes will drop out of the market before the onset of the statutory regime in April.
Marsh says he understands that in January only around 10 firms had applied for authorisation. He says the FSA expects only 100 to apply out of the 180 Sipp firms in the market.
Marsh, who applied for authorisation in December, says the lack of applications is primarily due to stringent capital-adequacy rules, requiring firms to hold the equiv-alent of at least 13 weeks’ running costs. He admits his firm found the requirements challenging and predicts smaller firms with under 1,000 schemes will struggle to comply.
Marsh says the rules dictate that firms can only use spare cash or client debts less than three months old. He admits this has proved very challenging for his firm, which is fee-based, as it is almost impossible to collect all fees within three months.