The much-anticipated reforms, which have led to much debate in the sector, finally take effect this week on Thursday.
Financial Planner James Jones-Tinsley, a Sipps technical specialist for Barnett Waddingham, has outlined concerns over valuing some assets for capital adequacy purposes. He said some such as commercial property and unquoted shares are ostensibly a matter of opinion.
Writing for sister website Sipps Professional, he said: “For those Sipp providers who permit the holding of unquoted shares within its schedule of allowable investments, the difficulty lies in sourcing someone who is both willing and able to provide a written opinion of the prevailing value of an unquoted share, on an annual basis.”
He said: “I see this dilemma as an unintended consequence of the capital adequacy regime.
“Faced with a significant annual cost, it appears likely that members will rather choose to sell or transfer the unquoted shares out of their Sipp, rather than retain them as part of their investment portfolio.
“Consequently, the ability to hold unquoted shares - as a unique selling point of a bespoke Sipp - is ultimately compromised by ‘regulatory creep’.”
He said: “Laudable as the aims of capital adequacy are, only time will tell how the theory translates into practice. The example of unquoted shares serves to demonstrate how those aims may be ‘lost in translation’.”
He also believes the impact of Brexit on property fund suspensions has arguably turned a ‘standard asset’ into a ‘non-standard asset’ overnight, by frustrating the ability to readily realise the asset within thirty days.
He said: “As things stand, Sipp providers enter this ‘brave new world’ against a backdrop of significant market consolidation, some providers entering administration before the regime even begins, and others charging their members for their costs of meeting capital adequacy.”