This was followed by CP12/33 outlining new capital adequacy requirements for Sipp operators, which if implemented in full, could put in jeopardy the survival of a not insignificant number of smaller SIPP operators. Ironically and worryingly this could create customer detriment that the FSA seeks to prevent.
Is it all gloom and doom? No. Many Sipp clients use drawdown and during the year have been hit with up to 50 per cent reductions in income. Drawdown could do with a fundamental policy review but the government’s u-turn of reverting back to 120 per cent of GAD is a welcome short-term measure, although no time has been given for this to be implemented. Although not Sipp specific, let us not forget the significant simplification achieved by the Department for Work and Pensions by scrapping contracting out from 6 April 2012.
Finally, 2012 is reckoned to be the year in which the number of Sipps achieved recehes the one million mark, which in itself represents significant growth and a fantastic success story. It moves Sipps from the niche to the mainstream market and as such there has to be some acceptance of change to swim in the ocean rather than the pond.
Events of 2012 represent a challenge for Sipps, but their concept is sound and the industry is resourceful, such that it is hoped that future years may be described as wonderful years, or as the Queen might put it, “Anni Mirabiles”.
2012 started off reasonably well. Implementation of fixed protection from 6 April was a known factor, protecting members against the drop in the lifetime allowance from £1.8m to £1.5m, part of measures to restrict pension tax relief, which included the slashing of the annual allowance from £255,000 to £50,000 in April 2011.
As discovered from the Chancellor’s Autumn Statement on 5 December 2012 this was just a dress rehearsal for a further cut in the annual allowance to £40,000 and lifetime allowance to £1.25m, due in 2014. Whilst these reductions are not a Sipp specific issue, Sipps are commonly used by high net worth individuals, so Sipp clients could well be adversely impacted by these further reductions. The constant changes also sap confidence in pensions.
Spring, rather than heralding sunshine, saw some dark thunder clouds rolling in. The very things that make Sipps a stand out proposition - investment choice and flexibility - were coming under increased scrutiny as a means by which consumer detriment could occur.
