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Claire Trott: Sipp due diligence is about more than cap ad


We are increasingly being asked to complete surveys for adviser firms looking to decide who to put on their panel of Sipp providers. One question that has cropped up time and again over the past year has been on capital adequacy.

I understand that in the run up to the change in rules due to come into force on 1 September firms want to be sure we are ready to meet the new requirements and that we will still be around. However, that is all a bit late in the day now, so I hope the focus on this will soon die away.

We have to have the money even if we do not agree with the rules as a whole. We have to hold more than the amount we calculate today because things change, funds under administration will hopefully grow and some assets will inevitably become non-standard despite having been standard on day one.

The rules are what they are and providers will be ready – otherwise they would have exited the market by now. There is no easing into this; everyone has had years to get themselves sorted. I can assure you the FCA will be looking closely at returns and there will be a round of reviews to check providers are telling the truth.

So, if we assume all providers have and will continue to meet the capital adequacy requirements then there are clearly more important issues to be addressed. These should be higher on the list of questions to be asked.


Sipps are really all about service. This has always been a hard one to prove in a questionnaire but that is just one of the limitations of asking a provider to help you decide whether they should be on your panel or not. It is more useful to ask your peers. They will have had experience of other providers and by pooling these you will be better informed to make a decision on whether those you are looking at offer the kind of service you and your clients require.

There is no right or wrong when looking at the question of service. Some may want a named contact or a 24-hour call centre, while others might want to deal with someone in the flesh. All of these options are available, it is just a matter of choosing what suits you.

Investment options

Investment options are also a key driver in choosing provider and, again, it is a case of what suits you and your clients. The widest range of assets is not necessarily the best benchmark to have when choosing. Sipp providers have a responsibility to only accept assets that are suitable for a Sipp investment and that can be administered appropriately.

If the asset is so complicated the provider struggles to get to the bottom of what it really is, then it is not going to be something they want to deal with. In addition, if they cannot value it easily you will have issues when you come to try and access benefits for your client.


Flexibility is another area Sipps are known for and this is something that is easily collected from a survey. What benefit types do they offer and how quickly did they make the new options available to their clients after the changes in legislation?

I am not sure the pension freedom changes are representative here as they were not a big step for most Sipp providers. But looking back at the introduction of flexible drawdown, for example, could they offer that from day one? The variation in death benefit options is also something providers should be making available as soon as legislation changes.

All in all, then, questions about capital adequacy have already been answered, purely due to the fact providers are still here. What we need to do is look at how Sipps are being used in order to determine which provider will meet the needs of the end client. This may differ from client to client so a fixed panel may not be the way to go.

Claire Trott is head of pensions technical at Talbot and Muir



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