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17 Apr 2013

Sipp Operators Face Reforms In 2013

The recent introduction of the Financial Conduct Authority has led to a dramatic overhaul in the UK´s financial services industry. Self-invested personal pensions are no exception to this and over the next few months, they are set to go through a number of changes.

One of the most hotly disputed reforms is the ‘CP12/33 A New Capital Regime for Self Invested Personal Pension (Sipp) Operators´, the FT Adviser reported. It proposes that the fixed minimum capital required for Sipp operations is increased to £20,000, up from £5,000. Moreover, it also suggested that the total capital requirement should consist of an initial capital requirement based on assets under administration and a capital surcharge be determined according to the percentage of underlying schemes holding non-standard asset types.

Generally speaking, Sipp operators have no problems with increased capital requirements but the resulting change in regime is likely to lead to market consolidation, causing smaller Sipp operators to exit the market voluntarily. In turn, this would affect the competitiveness of the market, the FT Adviser said.

Another change that involves Sipps is the ‘CP12/20 Personal Pensions´, issued by the now-defunct FSA. As of 6 April, Sipp operators are required to disclose various details, such as the effect of charges, projections and reduction in yield information and retained commissions. While it aims to provide transparency, the reform is adding an extra administrative burden, Sipp operators claim.

Last but not least, Sipp operators have been warned to expect stricter supervision, emphasising on previously identified weak areas, the FT Adviser concluded.

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