FCA's SIPP amendments to "reduce costs for firms"

The current rules require firms to calculate their capital requirements in relation to their assets under administration, with an additional capital surcharge for firms that administer non-standard assets.

However, since the FCA has received comments on the rules, it has announced some "minor changes", along with some guidance to clarify certain areas.

The FCA admitted that "for some firms, obtaining accurate quarterly valuations of the AUA in a timely manner can be difficult, largely due to systems and reliance on third parties."

Therefore, firms can now rely on the valuations provided to members for the purpose of the calculation in these rules. This would be calculated as the sum of the most recent annual valuations of the personal pension plans administered by the firm over the preceding 12 months.

The FCA's quarterly consultation paper explained:

"So, on 1 September 2016 when the rules come into force, a firm would calculate the sum of the most recent annual valuations provided to members, subject to any revaluations.

"Broadly, these will result in reduced costs for firms. For example, the obligation to obtain quarterly valuations of AUA under the previous methodology may have been costly for some firms, due to systems restraints and renegotiations of contracts with third parties.

"Under these proposals, such costs would be reduced, as firms would simply need to calculate the sum of the most recent valuations provided to members, subject to any revaluations, on a quarterly basis. This is data that should be readily available to the firm, and so costs should be more limited."

Gareth James, Head of Technical Resources at AJ Bell, commented:

"The proposed valuation changes are broadly helpful for SIPP operators as they’ll reduce the amount of work required each quarter.

"If some firms were looking at their charges because of the extra work they were going to need to do each quarter then this should mitigate at least some of any need to increase fees.

"In terms of the changes to standard asset definitions, broadening out the definition of listed shares will be helpful. The old definition was much more restrictive than the one that SIPP operators had been referencing for over 10 years. The updated broader definition should remove any chance that SIPP operators will block securities listed on some well-established overseas exchanges."