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28 Nov 2012

FSA Plans Increase In Capital Requirements For SIPP Operators To Protect Investors

The Financial Services Authority (FSA) late last week released proposals for an increase in the capital requirements for Self Invested Personal Pension (SIPP) operators in a bid to protect investors in the event of a wind-down.

The regulator plans to raise the absolute minimum capital requirement for SIPP operators from £5,000 to £20,000. The increase reflects the FSA´s experience which has shown that wind-down costs rarely fall below this figure.

In addition, the FSA has proposed that the total capital requirement for an operator should be determined by

the amount of assets under administration (AUA), SIPP operators holding non-standard assets, including some Unregulated Collective Investment Schemes, will face an additional capital surcharge as they will require more time to transfer in the case of a wind-down.

Operators will be required to hold core capital in a form realisable within a year, while capital held against the surcharge will need to be realisable within 30 days.

The regulator will give time to operators that need to raise new capital by providing a transitional period of a year between the release of final rules and their implementation.

The proposals come in response to the volume, range and complexity of assets currently being put into SIPPs and will provide better protection for investors in a wind-down situation, the FSA´s head of investment policy David Geale said.

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