Sipp standard asset rules firmed up by latest FCA paper

The latest FCA statement on the new capital adequacy rules strengthens the view that commercial property is, in most cases, a standard asset, a pensions expert says. The FCA published what it called ‘minor changes’ to its capital requirements on Friday. Changes to the rules had already been outlined to take effect in September 2016.But the regulator has laid out amendments after calls for further clarity from the industry.{desktop}{/desktop}{mobile}{/mobile}Claire Trott, head of pensions technical at Talbot and Muir, said: "The response to the most recent consultation on the capital adequacy requirements for Sipp operators clarifies a number of points in particular around commercial property, making it clearer what is meant by being capable of being sold.“This continues to strengthen our view that commercial property is, in most cases, a standard asset.”The FCA document has listed UK commercial property under a list of standard assets.It also contained a note, which stated: “A standard asset must be capable of being accurately and fairly valued on an ongoing basis and readily realised within 30 days, whenever required. Valuations should be undertaken in accordance with the generally accepted standards used in the relevant sector for the asset.”Ms Trott said: "In addition, DFM portfolios where there are clear agreements in place to define and limit the portfolio to standard assets, are accepted as a standard asset themselves, making it easier for providers to manage these portfolios and how they work with DFMs."The response is generally helping clear up any issues that have been outstanding, so trying to make the processes simpler to deal with.”She added: "Peer to peer lending had been raised in at least one submission with the request that it should be a standard asset, but the FCA doesn't believe the market shows the right qualities to make it standard. This will remain under review but to my mind it makes sense that this shouldn't be a standard asset."Under amendments to the standard asset list, the FCA paper stated: “We propose to remove ‘corporate bonds’ from the standard asset list, to capture quoted corporate bonds, which are covered by this new wording. Firms should note that, whilst this proposal expands the standard asset list, the requirement that the asset must be capable of being readily realised within 30 days, to be considered a standard asset, will still apply.“We also propose to change ‘bank deposits’ to ‘deposits’, as defined in the FCA Handbook, which makes clear that building society or credit union deposits are eligible. We would expect that most deposits should be breakable, albeit with a penalty, and so should qualify as standard. However, if a firm believes that this is not the case for an individual deposit they should contact the FCA.”

Sipp standard asset rules firmed up by latest FCA paper

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