City Trustees - part of Mattioli Woods



News and Media

09 December 2014

City Trustees sets the standard for non-standard investments

SIPP provider, City Trustees, part of Mattioli Woods plc, disagrees with the call for a permitted investment list, and believes that additional and ongoing due diligence is required for non-standard assets.

Unlike SSASs, SIPPs are regulated products, although many providers who offer both, afford the same criteria and scrutiny when looking at allowable investments. City Trustees currently has thorough due diligence procedures in place to review any non-standard assets prior to their inclusion within a pension scheme, and carries out ongoing reviews of such assets. Ed Carey, Managing Director, commented:

"With the FCA's capital adequacy review, many SIPP providers are refusing to consider accepting non-standard investments in a pension scheme. This flies in the face of one of the key attractions of a SIPP; its ability to hold a wide range of investments."

"As a provider, we have a very open attitude to investments that are presented to us by our IFA partners. However, as co-trustee we have a duty of care and a responsibility to our members to ensure any investments fully meet HMRC guidelines. For this reason, we need to check the adviser has assessed the suitability of a non-standard asset within the SIPP, as well as completing our own due diligence".

The FCA's recent thematic review highlighted a number of issues concerning non-standard investments, including insufficient capital to absorb unexpected liabilities; a lack of evidence of adequate due diligence being undertaken for investments, and poor monitoring. Mark Smith, Head of Compliance, added:

"It is primarily about suitability. There is still a place for non-standard investments, but it has to be the right type of business and the right type of client. It is also about systems and controls, and SIPP providers need to be able to demonstrate to the regulator the safeguards they have in place".

As part of the review into the SIPP market, the FCA is considering whether certain operators should not be accepting unregulated collective investment schemes (UCIS), unlisted shares, and commercial property syndicates. Commercial property that cannot be readily realised within 30 days may also be deemed as non-standard.

From 1 September 2016, the FCA will introduce a number of changes to the existing rules. These will have a significant impact on SIPP providers, especially those that have focused heavily on the non-standard market, and have high volumes of clients within this category. SIPP operators will need to hold more cash in their businesses if they allow their clients to hold SIPP investments that are non-standard. City Trustees is in a strong position to meet regulatory changes and the enhancement of capital resources.

The FCA recently issued a warning letter to all SIPP operators stating that a significant number were failing to comply with capital requirements, or undertaking inadequate due diligence in relation to non-standard SIPP investments.

"With numerous SIPP providers already trading on thin margins, many may not be able to comply with the new requirements. We expect some SIPP providers will exit the market, potentially leaving clients' pension savings at risk. In order to stay solvent, other providers may need to dramatically increase standard scheme fees, which will affect all clients not only those who elect to invest in non-standard assets. The industry now needs to instil a strong compliance culture to protect clients' assets, and demonstrate that it can regulate itself in line with FCA expectations" Mark concluded.

 

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City Trustees is a trading name of Mattioli Woods plc. For news updates on the Group, please visit our central News & Media on the Group website.