Although many of those surveyed confirmed the minimum requirement is being met, a large number still failed to disclose this information. The ambiguity surrounding how commercial property should be labelled is apparent from the responses, which shows a split between those segmenting the assets as standard and those doing the opposite. It is an early indication of the issues faced by firms attempting to deal with the finer points of the requirements.
Martin Tilley, director of technical services at Dentons, says the demands for quarterly reporting and even the need to confirm capital adequacy levels have been challenging. He says, “This has without doubt been a struggle so far for some of the providers who have exited the market pre-1 September. While holding untouchable capital adequacy is one thing, businesses will still need available capital to continue to run and grow the business.”
Mr Tilley adds providers that do not hold this additional capital may find it difficult to sustain growth, and, inevitably, could become targets for larger firms on the hunt for acquisitions.
However, others believe that firms of all shapes and sizes can still thrive despite the introduction of these requirements. Lee Halpin, marketing manager at @Sipp, suggests, “Traditional full Sipp providers should be well placed to continue to offer pension-led business-funding solutions at a time when new businesses are being created at a record rate.”
All asset types must now be categorised as standard or non-standard, with any not included in the FCA’s pre-defined list of standard assets automatically being classified as non-standard.
Table 4 shows the assets that Sipp organisations are currently offering, and whether these will continue to be offered as a result of the new requirements.
However, the run up to September saw one particular development that called into question the appropriateness of these categorisations.
“Weaknesses in the new regime became apparent even before it took effect,” says Mr Leggett. “When some property funds temporarily closed due to post-Brexit market nerves, they went from being standard assets to non-standard assets overnight although not everyone seemed to agree. This is not satisfactory.”
The new regime now applies nonetheless.
Dangers of D2C
Historically, many providers would only allow Sipps to be transacted through an adviser and not directly by the consumer.
Sipps, by nature, are more complex than other retirement-based provisions such as personal pensions and annuities, and this lack of consumer understanding could result in a raft of complaints.
As financial services and pensions have been heavily tarnished in recent years, providers understandably want to guard against further negative sentiment.
However, the pension freedoms have forced them to change tack and look again at the DIY market, as many consumers feel knowledgeable enough to dodge the advice costs and manage their own investment affairs.
