Suffolk Life has backed the FSA’s decision to exclude commercial property from the list of “standard assets” it will reference when calculating capital adequacy requirements for Sipp operators.
Last week, 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.
Following the FSA announcement, Dentons and A J Bell said they planned to challenge the regulator’s commercial property stance.
Suffolk Life head of marketing Greg Kingston says: “We think the regulator has got it right on commercial property.
“It should be a non-standard asset. It is incredibly complex to administer and it is one of the few assets that could deliver negative equity.
“You could argue that for overseas property the FSA could increase capital requirements even more. At the moment there is a 5x multiplier, but given the uncertainties of these investments then extra protection might be required.”