Fears Sipp cap ad could block blended pension products

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New Sipp capital requirements could block providers’ plans to launch products that blend drawdown and annuities.

Annuity provider Partnership has launched a Sipp containing an annuity that can pay the income inside the pension wrapper.

However, FCA capital adequacy rules that come into force in September mean Sipp operators have to hold higher capital against non-standard assets.

The regulator has confirmed annuities should be considered non-standard assets, meaning providers planning to offer the product may have to hold far higher reserves.

Annuity providers are already required to hold much more than Sipp firms but an insider says small Sipp providers could be hit.

He says: “I don’t believe many, if any, Sipp providers have considered this at the moment as there are very few products that involve reinvestment of income available, but if the demand for this type of product were to grow it could become an issue.”

James Hay head of technical support Neil MacGillivray says: “In the mass Sipp market they are focusing on standard investments so to go beyond that adds to costs quite considerably, that in itself will prevent businesses taking these things on.

“New investments and structures need to be looked at in terms of being regarded as standard or non-standard – we are still struggling to finalise the existing lists of assets.”