• 198,000 in full-range, bespoke Sipps, with total assets of £52.7bn and average plan size of £266,000.
Falling short
The upward trend could soon be dashed by FSA intervention, with its previously mentioned papers potentially dramatically altering the market.
While the FSA does not make such reports without reason, there is a risk of the whole Sipp industry suffering as a result. “Bad practice could threaten the reputation of the industry as a whole,” says Andrew Roberts, partner at BW Sipp. “However, it is important to distinguish between the seriousness of the issue and the extent of the issue. GC12/12 did not do this.”
The ultimate effect on consumers is beginning to show, he adds. “The increased cost of regulation is already creating a shift away from Sipps towards SSASs and Qrops,” Mr Roberts says. “Pushing consumers to non-regulated products should not be seen as a victory.”
The combination of the thematic review and the proposed capital adequacy changes looks set to significantly shake up the industry. To attempt to assess how ready the market is, we asked providers to report what percentage of their capital adequacy requirement would be covered had the rules come into force on 1 February 2013, along with the percentage of non-standard assets.
Table 3 shows the results, with fewer than half choosing to respond. This is telling in itself - if a provider is 100 per cent ready, why would it not report it? But the point of this exercise is not to lambast those who would not meet the capital adequacy standards already; there is no legal requirement for them yet to do so. In doing this we had hoped to gauge how far the industry has to go in readying itself for the proposed changes. All this really shows us is that the majority is not prepared to show its hand. Of those that did, six out of 29 are not ready; extrapolated, that would account for 20 per cent of the market.
There has been much backlash against the proposals, particularly from smaller providers. The Association of Member-directed Pension Schemes (Amps) submitted a response to the consultation arguing that the proposals are “blatantly anti-competitive”. It analysed a scenario in which an average Sipp was £200,000 and 50 per cent of total assets were non-standard, concluding it would cost a 500-Sipp provider an additional £699 to take on one new customer, while a 40,000-Sipp provider would only need an extra £78.
“The FSA has, it seems, plucked figures from the air,” says Hamid Nawaz-Khan, chief executive of Alltrust. “Even an industry outsider reading the paper would deduce that it was pitched against the small operators. Combined with the proposed one-year transition period, they really want to make things difficult.”
All adds up
