The FSA is proposing to switch from a capital adequacy system based on operating expenses to one which is based on Assets Under Administration (AUA) and the percentage of SIPPs which hold “non-standard” assets. The FSA has produced a list of standard assets, and all assets not on that list will be non-standard.
AJ Bell Marketing Director Billy Mackay said, “We’ve been calling for some time for the introduction of a permitted investment list, either by HMRC or the FSA. The proposed capital adequacy rules are a step towards a list of that nature as providers will have to consider whether they are prepared to hold asset classes which could increase their capital adequacy requirement. We don’t anticipate that the rules will mean any asset classes are completely closed to SIPP investors, but there may be a tightening in terms of the number of operators willing to hold some of the more esoteric investments. I’m sure the FSA would welcome this.
Mackay continued “One of the main points of friction in the consultation will undoubtedly be the make-up of the list of standard assets. In particular there will be debate as to whether UK commercial property should be included as this has long been a popular asset within SIPPs. The FSA’s concern with commercial property will be that it can take some time to dispose of a property from a SIPP. The industry will argue that the time it takes to dispose of a property isn’t an issue because of the range of SIPP operators who would be prepared to hold the property.”
Mackay concluded “At a time when the way in which SIPPs and platforms are being used by advisers is becoming more closely aligned, it may also be reasonable to consider whether the rules should allow for this.”