The Financial Services Authority's (FSA's) hike in capital adequacy for self-invested personal pension (SIPP) providers is ‘overkill' but it is unlikely the regulator will change tack, according to one provider.
Barnett Waddingham head of business development for SIPPs Andy Leggett said the hike in capital adequacy minimums, announced last year, would inevitably lead to mergers and acquisitions in the market.
He added the overall focus of the consultation, which will increase the minimum level of money held by providers from £5,000 to £20,000, was out of proportion to the few cases of failure the market has experienced and the on-going thematic review was of greater importance.
"The proposals are based on assets under management, but that is not right. It does not seem relevant. I think it is a mistake, but I think it will go ahead."
He also claimed many providers were reluctant to speak out against the plans individually. "I am surprised by the disconnect between what providers say to each other and what I have read in the press to date."
Leggett (pictured) said some providers did not want to appear to be against the proposals as it might look like they could not meet them, and others had a vested interest in market consolidation to grow their businesses.
He explained while Barnett Waddingham is looking expand through M&A the firm was still opposed to the structure of the FSA's plans, adding properly run firms should not be getting into difficulties in the first place.
He said Barnett Waddingham already holds about £650,000 - well over 30 times the new minimum and 130 times the current minimum.
"Our cap ad requirement will rise between three and four-fold, which we can already meet. We understand that among certain of our best quality peers, increases of a similar order of magnitude are implied.
"So, in our case, it's a rise from £650,000 to about £2m which we think is more than is required to ensure consumer protection.
"Businesses should be run properly. Is the solution to have big buffers of capital or is it to make sure that businesses are being run properly and do not get into trouble?
"There should not be a situation where a business is in such bad shape that nobody is willing to take it over, that is a massive failure of oversight."
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