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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.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. So the FSA would like to decimate the SIPP market to make life easier for them
    Sorry who gave them the right to dictate the market
    If A SIPP provider is breaking the rules then they can act if not ……
    This seems if true to be anticompetitive – has some large SIPP provider slipped a brown envelope to someone or can they just not be bothered

  2. Its obvious isn’t it? big banks cant run sipps it doesn’t fit into their post RDR model, so they have got the FSA to make life tough for the sipp co’s.

    6wks of expenditure? for a trustee company – wow that must be a lot!

  3. The problem is that no everyone wants to use the big providers. They are not always the best and they sometimes give poor service. As many advisors are niche players so are some SIPP providers.

    The FSA should stop trying to direct the market to its own end. If the client accounts are all segregated then I see no reason why any SIPP provider should hold more capital than a standard advisor as all the costs are borne by the client and they only need standard operating costs.

  4. Bang on the button Ian Smith!

    The FSA is almost a perfect 10 failure.

  5. Once again the FSA believes big is best. Didn’t it learn anything from the bank fiasco?

    SInce when is a SIPP provider the same as a bank? The assets of the SIPP are ‘ring-fenced’ from those of the provider.

    More useless meddling from the FSA.

  6. Two things:
    As the SIPP providers are rarely holding client money if ever why do they need to hold anything more than the current position. If “one” goes down then the “book” should be able to be moved quickly without too much trouble to ano.
    Not the best advertisement for H&M!

  7. Exasperated Me 1st June 2011 at 3:12 pm

    The FSA is right to be concerned.

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