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.