AMPS alternative methods for SIPP Capital Adequacy

image courtesy of freedigitalphotos.net

image courtesy of freedigitalphotos.net

The AMPS alternative approaches to SIPP capital adequacy.

We are presenting two options, each with the same capital surcharge but with a different initial capital requirement. Each with a Minimum Fixed Capital Requirement of £50,000 (as opposed to the FSA proposal of £20,000).

Model 1
A tightening up of the current rules to stop arbitrage and have a level playing field
ICR = 25% x (the greater of annual Turnover and annual Expenditure)
CS = 1000 x (Number of Illiquid SIPPs*)
Total Capital Requirement = ICR + CS

Model 2
A system that more closely matches FSA’s formula but uses number of plans instead of assets under administration to deal with most of the headscratchers.

ICR = 10000 x √(Number of SIPPs)
CS = 1000 x (Number of Illiquid SIPPs*)
Total Capital Requirement = ICR + CS

*An Illiquid SIPP would be a SIPP with less than £1,000 in Standard Assets.

We also would support an additional protections, such as requiring SIPP operators with less well run systems and controls to have to hold additional capital of 20%, possibly in an escrow account.

I'd love to hear your thoughts

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