On 1 November, the FSA published Consultation Paper 12/29 (CP 12/29), containing the FSA's final rules on the disclosure obligations for self-invested personal pension schemes (SIPPS) – that is, the removal of the SIPP exemption to the charges disclosure requirements.
There is currently an exemption in place that means SIPPs do not have to comply with the charge disclosure requirements, however many firms still choose to produce key features illustrations (KFIs). This inconsistent approach to disclosure has distorted the SIPP sector somewhat.
CP 12/29 confirmed that, from 6 April 2013, SIPP operators will be required to provide consumers with KFIs and show how charges impact on the consumer's investment return. They must also make clear any bank interest or commission they retain on a member's funds. This change to the rules is designed to enable pension scheme members to be able to calculate and compare fees, charges, commission and interest across competing pension schemes. However, it will also significantly increase compliance costs for SIPP operators.
CP 12/29 also consults on proposals to introduce inflation-adjusted KFIs and improve guidance on designing and drafting product information. Comments on the proposals should be submitted to the FSA by 1 February 2013.
On 22 November, the FSA published a further Consultation Paper (CP 12/33) proposing to increase the minimum amount of capital held by SIPP operators, from £5,000 to £20,000 and adding surcharges for total assets under management and holding of non-standard assets. CP 12/33 also outlines a proposal that core capital must be held in a form that is realisable within one year and capital held against the non-standard asset surcharge must be realisable within 30 days. The impact of these proposals could see up to 18% of SIPP operators decide to leave the market as their businesses would no longer be economically viable.
Feedback on CP 12/33 should be submitted to the FSA by 22 February 2013, with a policy statement expected in late 2013.