This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
The Financial Conduct Authority Handbook update has provided clarity on treatment of commercial property in self-invested personal pensions, specifically, clarifying what is meant by such property being “capable of being sold” for the purpose of the definition of a “standard” asset. This will be of interest to SIPP operators and organisations or people who deal with SIPP operators as this feeds into to the new capital requirements for SIPP operators, which will come into force in September 2016. One element of the capital adequacy requirement for SIPP providers is that part of the reserve required is based on the percentage of a firm’s client base that holds ‘non-standard’ assets. “Non Standard” assets include clients who hold investments such as unregulated collective investment schemes, unlisted shares, unconnected loans, non-stock exchange-listed bonds etc.
In response to the consultation the FCA issued prior to the Handbook update, several comments were made in respect of extending the definition of “ standard” assets” to include such as crowd funding and peer to peer lending, given the recent enthusiasm being shown for this form of investment . A few crowd funding platforms do currently accept money from SIPPs . However, this form of “alternative” investment needs to be approached carefully with regards to recent FCA regulation of the concept and HMRC’s connected party rule. This rule restricts an individual lending money from their registered pension scheme to a relative of that individual or someone with who they are in business and if breached may have serious tax consequences.
FCA have suggested that they may consider these suggestions next year, hopefully after they have completed their joint Treasury consultation on pension freedoms.
