CAPITAL ADEQUACY - November 2017

The FCA have decided that SIPP operators need to hold significantly higher amounts of capital. The new rules came into effect on 1st September 2016.


The formula for calculating the capital is very complicated, based on the value of the assets under administration. The formula even includes square root functions in 2 different places and leads to some odd results. Whether all of this additional capital is needed and how much benefit there is for SIPP members is debatable.


Using the new formula, the minimum capital that Cabot Trustees is required to hold is £495,000.


Cabot Trustees is well capitalised and the regulatory capital that Cabot Trustees currently holds exceeds £600,000.


The main objective of the capital is to facilitate a transfer of the SIPPs to new SIPP operators if Cabot Trustees were to stop trading. Such a transfer could well be implemented within 6 months whereas the capital we hold equates to more than 2 years routine expenditure.