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Moret confident Sipps will thrive despite FSA reforms

by Michelle Abrego on Jan 31, 2013 at 15:13

Moret confident Sipps will thrive despite FSA reforms

John Moret has been an evangelist for Sipps since their launch in 1989 and, while his predictions for growth of the sector may once have seemed optimistic, he has consistently been proved right.

At the end of 2009, he predicted the number of Sipps would surpass one million by 2015, a number that has almost been reached already. So when he predicts the sector will account for £200 billion in five years’ time, that optimism should not be dismissed.

Perfect storm

But it is difficult to recall a time when the Sipp sector was under as much pressure as it faces now. It was at the heart of a perfect regulatory storm last year, as the Financial Services Authority (FSA) consulted on a hike in capital adequacy requirements on top of tougher disclosure rules.

The changes to capital requirements will force many Sipp businesses to increase their reserves more than tenfold, and the FSA has predicted nearly 20% of the firms affected could face closure as a result.

The regulator’s plans include controversial measures that would separate standard from ‘non-standard’ assets, with higher reserves required for the latter.

Unregulated collective investment schemes (Ucis) would be deemed ‘non-standard’ as well as, more controversially, commercial property, as the FSA has argued that difficulties in unwinding the investments prompted the need for stronger standards.

If advisers were in any doubt that the regulator had Ucis held in Sipps in its cross hairs, those were dispelled earlier this month when it issued a warning over flaws in the advice on such investments.

Reducing investment choice

Moret, who has earned the tag of Mr Sipp, said the FSA was being too heavy-handed in its treatment of the Sipp sector.

‘One of its principles is proportionality, but it’s debatable to call [the capital adequacy] consultation that [proportionate], when it proposes to force 20% of businesses to wind up. All of these are well-run decent businesses.’ he said.

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