Costly ventures
The charges element of the survey, as shown in Table 4, remains largely unchanged. As always, costs vary hugely across the industry; choosing the right Sipp depends heavily on what the client will be using the Sipp for and what they want to access. For simple Sipps, straightforward functionality and cost are likely to be top in the consideration process; for bespoke, value for money, efficiency and service are hugely important.
Perhaps more interesting is how charges will change to reflect changes to capital adequacy requirements. Ultimately, providers have to get the required capital from somewhere; the bill is likely to land with the end investor.
The impact on charges will likely be a key driver in segmenting the industry. If operators raise charges across the board, investors utilising more basic functions within a bespoke Sipp might be better off elsewhere. With capital requirements at a provider level, the changes will impact those that offer a range of Sipp types and charges addressed appropriately.
Ideas have been floated on linking charges – or perhaps just a deposit – to individual non-standard assets. So, for example, an investor could be required to submit a percentage-based deposit when investing in a commercial property. But the deposit amount would change depending on the value of the property, adding in regular valuation fees. In practical terms, this would be difficult to apply.
Investing in everything
So far, there has not been much fallout around the impact of non-standard assets on capital adequacy. Sipp providers are clearly holding off making any major changes until the final rules are published, with the details of investment types offered by each shown in Table 5.
Some bespoke providers are reporting that they are getting more enquiries about acceptance of more esoteric assets, one such company being Rowanmoor.
“We seem to be getting more enquiries about esoteric investments, probably off the back of some other firms choosing to retract from that, potentially over issues around meeting the capital adequacy requirements,” says Mr Graves. But there was a dip in interest when the Ucis paper came out in June, he adds.
It is widely believed that the cause of delay for the capital adequacy paper coming out is because the FCA wants to get it right. As its first major piece of pensions legislation since coming into force, it does not want to mimic its predecessor in coming out with one viewpoint only to change direction several months down the line.
