UK commercial property has been re-graded for SIPP investments by the Financial Conduct Authority (FCA) from a non-standard to a standard asset class.
This represents a major change in policy as the FCA had said it would be keeping UK commercial property as a non-standard asset earlier in the year.
According to the FCA there are around £2trn of pension assets under management in the UK pensions industry and around £100bn of these assets are in SIPPs. A substantial part of that is in commercial property.
The re-grading from non-standard to a standard asset class for commercial property has implications for the SIPP administrators in the way they calculate their initial capital requirements and will significantly reduce their compliance burdens.
Importantly, for investors the change means that standard assets are far easier and cheaper to transfer between schemes than non-standard assets.
With UK commercial property forming the “backbone” of the SIPP industry the change is an important consideration in protecting investors’ money should a SIPP operator exit the market, a time when investor’s pension savings could be put at risk.
The new rules will ensure that SIPP administrator firms carry sufficient capital to fund an orderly exit without affecting the security of the SIPP investors’ pension pots.
A List of SIPP standard assets:
Bank account deposits;
Exchange traded commodities
Government & local authority bonds and other fixed interest stocks
Physical gold bullion
Investment notes (structured products)
Shares in Investment trusts
Managed pension funds
National Savings and Investment products
Permanent interest bearing shares (PIBs)
Real estate investment trusts (REITs)
Shares listed on: AIM, LSE, or a recognised overseas investment exchange
UK commercial property
Units in Regulated collective investment schemes.