An apparent drop in Suffolk Life growth rates, meanwhile, is only due to previous figures having included the acquisition of European Pensions Management.
Transfer test
Will the market remain in good health? The years of rapid expansion may look unsustainable, but absent a major correction in risk assets, it is difficult to envisage a scenario in which growth rates go into reverse.
The boost provided by the pension freedoms is a structural, rather than a short-term driver of growth. Despite this shift, Mr Moret estimates just one-third of all Sipps have started vesting. But he thinks providers have more work to do in terms of the services they provide to those taking income. Current vesting options are displayed in Table A.
Other complications are also starting to emerge, most notably in the shape of greater scrutiny of DB transfers. High-profile examples of questionable practices, in relation to BSPS and beyond, have meant the FCA is now subjecting transfers to closer examination.
As advisers await the regulator’s latest pronouncements in this area, some Sipp providers think an atmosphere of greater caution could act as a check on market growth.
“With the actuarial assumptions having turned slightly, the recent volatility in the stockmarkets and the FCA’s ongoing scrutiny of advisers and their transfer processes, I can see that we might have a reduction in transfer-derived new business during 2018,” says Dentons director of technical services Martin Tilley.
The vast majority of DB transfers will be destined for simple Sipps, rather than full-scale wrappers offering a variety of non-standard investments (NSIs). But it is not just transfers that are under scrutiny from the watchdog – non-standard assets, too, are in the spotlight. An autumn 2017 FCA request asking for details of operators’ NSIs has left Sipp providers pondering the regulator’s next move.
“It’s likely that the FCA’s work will revolve around following up their third thematic review in 2014, including the effectiveness of due diligence processes, and how well Sipp operators are following those processes,” says James Jones-Tinsley, technical specialist at Barnett Waddingham.
“Adherence to the capital adequacy regime, the categorisation of standard and non-standard assets, and what sources Sipp operators are getting their business from, are also likely to feature.”
More than adequate?
Further details of the FCA’s thinking may well be provided in its 2018-19 business plan, due to be published on 9 April. Our own assessment of providers’ capital adequacy and NSI policies can be found in Table 1 andTable 2. This year, the table has been combined with our assessment of non-permitted investments, which previously formed a separate part of the survey.
