New Model Adviser - For Professional Investors

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

13 Sipp firms face closure from potential £54m bill

13 Sipp firms face closure from potential £54m bill

Planned increases in capital adequacy requirements could cost providers a combined £54 million and cause as many as 13 Sipp operators to go out of business, the Financial Services Authority (FSA) has estimated.

Earlier today the FSA published plans to hike the capital adequacy requirements for Sipp operators so the absolute minimum capital a provider will have to hold will increase from £5,000 to £20,000.

The FSA proposed there would also be an additional requirement for providers that hold ‘non-standard’ asset types such as unregulated collective investment schemes (Ucis). 

The regulator said that as a result of these proposals, operators’ capital requirements will increase by between £12 million and £54 million, depending on the proportion of non-standard assets held by providers.

The FSA said the proposals were likely to affect 75 providers, with as many as 18% of these, or 13 firms, facing closure as a result of increased capital requirements.

It said: ‘We believe operators that cannot afford to meet the requirements in this framework are not holding enough capital to leave the market in an orderly fashion, and by facilitating these exits we believe that the risk of harm to consumers is ultimately minimised.

‘We estimate that this may be in the region of 14% to 18% of the operators affected by this policy.’

The FSA said the ongoing capital compliance cost to the industry was likely to range from £700,000 to £3.3 million.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Comment & analysis

Asset managers: 'There is going to be a distribution revolution'

1 Comment Play Asset managers: 'There is going to be a distribution revolution'

In footage not used in our original CEO tapes videos, five CEOs discuss how distribution will change in the future. Will 'distribution' be revolutionised by technology the same way that Spotify changed music or the Kindle changed publishing?