Like last year, we asked providers to detail the breakdown of their Sipps into simple, mid-range and full-range, although many did not answer this part. As previously mentioned, there are no official regulator definitions, so it could be the case that many providers just do not know, or do not have the systems in place to make such calculations.
Chart 2 details the market breakdown by number of Sipps using Table 2. The majority - 73 per cent - sit in mid-range Sipps. Despite many not giving responses, the Table still starts to give an idea of what the Sipp market as a whole looks like.
Table 2 also shows the average Sipp value, giving some insight as to how Sipps are used. The average value is £234,792, down just over £15,000 last year. Figures vary in size, from The Walker Crips Ebor Nursery Sipp, which has an average value of £54,467, to the JLT Personal Pension trust, with an average Sipp value of £1.3m This figure comes as no surprise as JLT is one of the largest employee benefit providers, catering to financial directors. As with any year, some figures are to be expected given their target client wealth, such as Hargreaves Lansdown’s average value of £71,558, and others that cater to higher net-worth individuals, such as Rathbones (£468,984).
One of the main talking points of Sipps over the past few years has been the regulator’s intervention - or lack thereof - into capital adequacy levels. Both the thematic reviews in 2013, and the proposed capital adequacy changes, which are expected to be announced in the second quarter of this year, are set to really shake up the Sipp market.
Robert Graves, head of pensions technical services at Rowanmoor, says the FCA’s proposed capital adequacy requirements remain a big issue for the Sipp industry. “There is general agreement that the capital adequacy regime should be reviewed and that minimum thresholds should be increased. However, the proposed formula as it stands will significantly increase the capital adequacy requirements for smaller Sipp operators who have Sipps with high fund values and a high proportion of Sipps that invest in non-standard investments, which includes commercial property.”
He says that by the FCA’s own admission this could mean a number of Sipp operators exiting the market. “It is hoped that the FCA will consider an alternative basis for calculating capital adequacy and this will be reflected in the policy statement when issued later this year.”
Capital adequacy
Our survey again asked providers what percentage of the capital adequacy requirement would be covered if the rules in CP12/33 were currently applicable. For example, if total capital requirement was calculated as £100,000 and available relevant capital is £80,000, coverage would be 80 per cent. Table 3 details the responses, and shows those who did not respond to the question - a staggering 38 per cent of respondents. It should be noted that any provider who stated more than 100 per cent coverage has been labelled as 100 per cent.
