FCA capital adequacy proposals may be held back to June 2014

The FCA may hold back on releasing its much-awaited final proposals on capital adequacy until as late as June 2014. The proposals were originally expected by September 2013, then pushed back to late November and now the FCA says it wants up to eight more months to consider the many responses to its over-arching thematic review on Sipps.The delay means it is possible that any capital adequacy changes may not take place until 2015 although it's possible they could take place by the end of 2014.The proposals suggest increasing the minimum capital requirement for Sipp firms from £5,000 to £20,000. In addition, there would be a higher capital requirement for assets deemed "non-standard," which would include property and some other less liquid assets.Many Sipps providers have expressed concern about proposed higher capital adequacy requirements, especially those with high numbers of property investments.Property is likely to be deemed a more risky asset class by the FCA in terms of Sipp investment and will require more significant amounts of capital to be set aside in the event of a provider defaulting.{desktop}{/desktop}{mobile}{/mobile}The FCA says it cannot give an exact date for the capital adequacy proposals to be published and will now only commit to the "first half" of 2014.An FCA spokesman told Sipps Professional: "We are aiming to publish our final position on Sipp capital adequacy in the first half of next year."We have had a lot of responses to the consultation so it's only right that we evaluate those carefully; the additional time will also allow us to take into account the findings of the thematic review that was launched in October."FCA director of long-term savings and pensions Nick Poyntz-Wright told a conference of AMPS (Association of Member-directed Pension Schemes) this week that the final proposals should be published by the spring although it could be early summer before they are made public.The Sipps thematic review is due to be unveiled by next autumn allowing it and the capital adequacy paper to now be tied together.The delay to the proposals brings some relief to smaller Sipp providers exposed to substantial property investments who faced having to find large sums to earmark as reserved capital.The aim of the proposals by the FCA, originally suggested a year ago, is to provide suitable levels of capital to allow Sipps and their investments to be transferred to another provider in the event of a Sipp provider's collapse. This avoids a regulatory cost.The FCA believes that while some Sipp investments, such as funds, could be re-registered relatively easily property is a more complex investment and more money would be needed to pay for the transferring of deeds and other legal costs.The watchdog believes that the changes would provide higher protection for consumers if a Sipp provider collapsed.

FCA capital adequacy proposals may be held back to June 2014

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