Trade body begins judicial review proceedings regarding FCA’s pension framework

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Posted in:Banking and Finance|December 8, 2014 | Join the mailing list

The Association of Member-Directed Pension Schemes (Amps) is to begin a judicial review of the FCA’s capital adequacy framework for Self-Invested Personal Pension Operators (SIPP’s), due to suggestions that the FCA’s actions and proposed amends are unlawful.

The FCA’s long awaited Capital Adequacy Rules were published in August 2014. Under the new rules, SIPP providers will be required to hold a minimum of £20,000 in reserve, with the exact figure being based on a calculation of assets under administration, and
with further capital added for ‘non-standard’ assets. The current minimum amount is £5,000, making the increase significant.

The overhaul is based on concerns that if a SIPP provider fails, there may be insufficient capital to move a member’s SIPP’s to an alternative provider, and that the customer or the public and/or the FSCS could end up footing the bill. The FCA’s aim is therefore
to ensure that all SIPP providers hold a higher amount of capital, thus creating stronger protection for members.

The new rules are due to come into force on 1 September 2016. However, the formula being used by the FCA to calculate capital adequacy has been scrutinised. Many are concerned that the assets under administration calculation fails to address risks with esoteric
assets. It has been suggested that a calculation based on the number of assets held rather than the value of assets would be more appropriate.

Concerns have also been raised in relation to the original list of ‘standard assets’, which failed to include UK commercial property, National savings & Investments or UK deposit accounts; all popular investments for SIPP members. The FCA has now changed its
mind on this point and added all three to the list of ‘standard investments’.

According to the Financial Times, a letter to members of Amps provides that the decision was taken pursuant to an ‘unfair procedure and inadequate process of consultation.’ There is a worry that the new rules favour large firms and put smaller firms at risk.
The FCA has confirmed it received a letter from Amps, but has provided no further comment in relation to this.

The FCA has also been criticised over its handling of pensions generally.

For more information about any of the above or for practical advice on this or any other aspect of banking and financial disputes, please contact
Olivia Baden
of the Berg Banking Litigation Team on 0161 829 2599 or email her at

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.) 

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