In the mid 1990s there were three fundamental SSAS administration providers: the specialist, the life office and the adviser. Sipps existed and several life offices had established them through outsourced providers, but they did not become mainstream until later that decade when the life offices (realising the potential of the Sipp market) started to provide in-house services.
Consequently, there was a move in the early 2000s for life offices to dispose of SSAS books, enabling them to concentrate on what they perceived to be the more popular and profitable Sipp. SSAS administration remained the domain of the specialist provider.
M&A between Sipp operators is widely anticipated in the run up to the FCA’s new capital adequacy requirements from September 2016 (such as Curtis Banks’ acquisition of Suffolk Life – page 8). There are also some organisations whose Sipp portfolios are not core to their business, such as wealth management companies, who may dispose of their portfolios.
SSASs are different. Looking at the market in isolation, there is no financial reason for a SSAS administrator/trustee to dispose of its portfolio for regulatory purposes. If there is to be M&A in the SSAS market, it will not be due to direct regulatory impact.
The list of major providers shows a concentration of schemes within a relatively small number of practitioners and importantly, very few companies which do not also have Sipp portfolios. It is the holding of a Sipp portfolio that may have implications for the SSAS provider’s operations. There are few providers whose Sipp books are smaller than their SSAS books. In many cases, that part of the overall portfolio is secondary to the management of the Sipp book, so it is quite possible the continuing operation of the SSAS book becomes secondary to the financial requirements of meeting the regulator’s Sipp capital adequacy requirements. Some providers may therefore look to raise capital to support their Sipp business by selling off their SSASs. This is most likely to be at the smaller end of the market, but companies may have difficulty disposing of their SSAS books if they are not also prepared to sell their Sipp business.
Hungry for Sipps
Clearly the market has more appetite for acquiring Sipp books and there is a fundamental obstacle for a company that runs both SSAS and Sipp selling off just its SSAS portfolio. Most, if not all, providers have the same trustee company for both books. If they want to retain their Sipps, they cannot sell the trustee company as it must be retained to run the schemes.
As each SSAS is separately registered with HMRC, the only way to transfer this business is to change every scheme’s corporate trustee to the trustee company of the acquiring business. Not only is this time consuming and expensive, it also gives the client the opportunity to move elsewhere, potentially leading to a substantial reduction in the amount of business that can be transferred. This is an almost insurmountable problem and really pushes down the value of a separate SSAS book.
