Capital
Finally, there is the requirement that capital held against the capital surcharge is in sufficiently liquid form, so that it can be available within 30 days. This means it has to be cash on deposit. These proposals will result in huge sums of money being held in bank accounts, yielding virtually nothing, which cannot be used for business development by the Sipp operators. This is not a sensible use of capital.
Over the past 12 months, the FCA has had time and opportunity to re-think the proposals on capital adequacy. It has failed to do so, making minor adjustments that do not resolve the inherent problem of the small number of Sipp operators who have poor corporate governance and are clearly under-funded for developing and supporting a complex pensions portfolio.
While I would not go so far as to say the FCA is seeking battle with many Sipp operators, it does seem a strange coincidence that the capital adequacy policy statement was issued on the 100th anniversary of the commencement of World War I.
Ian Hammond is managing director of Rowanmoor
Key Points
Policy Statement 14/12, published by the FCA on 4 August, does not provide a sensible framework for the future capital requirements of Sipp operators
Why should it take longer to wind down a company which holds assets of greater value in the same number of arrangements?
The majority of respondents to the original consultative document suggested that the number of Sipps was a more appropriate measure to determine capital adequacy
