Ain’t necessarily so… the David and Goliath effect?RSS icon

Written by Altus on Friday 17 January 2014

Since the Henry Stewart SIPPs and Retirements Options conference in October there have been several interesting developments in the SIPP world. One in particular that caught my attention was the announcement by Capita on 18th November 2013 that they (CSIPS) were withdrawing from the SIPP administration market.

In their short press release CSIPS stated that “…[SIPPs] operate in increasingly competitive and highly regulated markets and are loss making…”.

On the face of it this looks like the tip of an oft-predicted iceberg of SIPP providers exiting the market due to mounting regulatory pressures. Add in the fact that CSIPS were a founding father of the SIPP industry (originally as PPML) and it’s tempting to see an ominous portent for the market as a whole. But is it really?

Many of the features and advantages of SIPPs were pioneered by CSIPS and this forward thinking brought them great success; they are still one of the largest SIPP providers and for some time were the largest. But, like many early pioneers, CSIPS had to improvise solutions to support their market innovations which inevitably erodes efficiency as systems and processes are repeatedly adapted.

Despite attempts to streamline their technology landscape, CSIPS has never quite managed to industrialise their operation to the same extent as other parts of the Capita empire and, to my mind, it seems quite possible that this legacy challenge rather than regulatory pressures prompted the intended closure of CSIPS. Yes, the scale and rate of regulatory change adds to the complexity of SIPP administration but it’s so much harder to deal with using disparate and ageing technologies, especially in the face of the downward pricing pressures facing pensions as a whole.

Capita’s own announcement hints at this “…we have taken a decision to close our SIP (Self Invested Pensions) administration business…which is sub-scale and therefore unviable”. Sub-scale is a relative term and later entrants, using newer technologies with simpler products can still prosper in the SIPP market.

In late 2013 industry figures indicated SIPP assets under administration of £131bn with year on year growth of 24% pa since 2008. Let’s make no mistake this is a growing market. Smaller providers will feel the squeeze of regulatory change but there are opportunities for small and large alike with the right systems and processes.

In short, the SIPP market is changing and there will be victims, but not necessarily for the reasons circulating in industry press.

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