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FSA could force Sipps with riskier assets to hold more capital

The FSA is considering forcing Sipp providers with riskier investments to hold more capital than those with less risky assets under proposals to be outlined later this year.

In June last year, Money Marketing revealed the FSA was planning to increase capital adequacy requirements for Sipp providers.

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

Speaking at the Association of Member-directed Pension Schemes annual conference in London today, FSA pensions and investment policy manager Milton Cartwright said Sipp providers who hold more risky esoteric investments are more difficult to wind-down than those with less risky assets.

He said: “It seems to us that the problems in orderly wind-down that we have encountered in the last couple of years have largely been as a result of the types of asset that the Sipp operator in question has held within a Sipp.

“There is a very strong correlation between the more esoteric types of asset that are held and the ability of a firm to wind-down in an orderly manner. Six weeks has certainly proved inadequate.

“One of the things we are looking very carefully at is the amount of assets held within the Sipp that are esoteric.”

Cartwright said while the regulator would not ban any particular asset from Sipps, providers should consider the risk of reputational damage if investments fail.

He said: “Frankly, Sipp operators are holding more Ucis investments than any other type of provider.

“There is a reputational issue for the Sipp industry here. These investments are quite often high risk, carry opaque risks and have low governance requirements.

“But we are not in the space of stopping people investing in what they want to.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. There is a very strong correlation between the more esoteric types of asset that are held and the ability of a firm to wind-down in an orderly manner. Six weeks has certainly proved inadequate.

    But we are not in the space of stopping people investing in what they want to.

    So let me get this right – you can do what you like with your pension pot – so long as it complies with law, etc – including UCIS – and the SIPP provider has to hold more capital adequacy IF you decide to invest in a UCIS, but the FSA are not going to stop you investing in it.

    Er, hello? Agenda?

    Just be honest or is that now too difficult for the FSA to do?

  2. “Frankly, Sipp operators are holding more Ucis investments than any other type of provider.”

    Thats because they are SIPP’s you buffoon!

    Why doesnt the FSA bans SIPP’s – but no it wont do that as they would be open to public scrutinisation – instead they try to do it through the back door.

    Pity they weren’t as concerned about the activities of the banks and their suicidal lending policies!

  3. The FSA may not be in the business of restricting pension investment, however HMRC should be.

    This is tax relieved saving and when tens of millions of pounds is “lost” in these esoteric investments and IFAs in reputable firms pick up the bill there should be greater restrictions or alternatively no FSCS cover.

    And perhaps no additional state benefits for those who are now on the bread-line because they have lost their pension through greed or stupidity.

    Maybe one of the smart law firms or the ambulance chasers will discover the SIPP Trustee had a duty of care and should not have permitted the investment in the first place?

    That seems to be the FSA stance, so look out for an Arch Cru type compensation arrangement for all those who have lost out in Green Oil, Renewable Money Trees and all the other exciting, once in a lifetime investments…

  4. Chris F Jones 15th May 2012 at 5:02 pm

    Linking a provider’s capital adequacy requirement to the length of time it might take to wind up the provider makes good sense. But an Individual Capital Adequacy regime carries big overheads – see the discussion on SIPPHub at http://lnkd.in/VJ4S93.

  5. To Anonymous @ 4.39 pm – Not all UCIS are complete crap you know!

    It is said you judge a man by his friends. If all your friends are ‘once in a lifetime investments’ people then you need to change them.

    Have a good day. Now, my Euro investments……

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