Sipp operators plan to challenge the FSA’s decision to exclude commercial property from its list of standard investments for capital adequacy purposes.
Earlier today, the regulator proposed increasing the minimum amount of capital a Sipp operator must hold from £5,000 to £20,000, with a surcharge for providers holding “non-standard” asset types.
The surcharge for non-standard assets will reflect the additional costs of transferring these assets. The FSA says this is necessary because it takes longer to transfer a scheme containing non-standard asset types.
Non-standard assets will be defined by reference to a list of standard assets. Commercial property does not feature on the FSA’s list.
MoretoSipps principal John Moret says: “Sipps with exposure to commercial property are going to be hit by this because that is outside the FSA’s definition of a standard asset.
“That is extraordinary given that about £10bn of Sipp assets are held in commercial property. I think the industry will push back on that.”
Dentons director of technical services Martin Tilley says: “We were very surprised to see commercial property wasn’t on the list of standard investments and that is something we will look to challenge.
“We have a fair proportion of commercial property on our book which we have carried out thorough due diligence on. If the FSA does not change its stance this would have a larger impact on us than we previously expected.”
A J Bell marketing director Billy Mackay says: “The FSA are concerned about the time it will take to realise or sell underlying Sipp investments, and commercial property could potentially take a while to deal with.
“But it is a long established asset class with no history of problems. We think commercial property should not be treated as an abnormal asset class and we will be making this point to the regulator.”