From Chart 1, we can see that only one of the four options is true consolidation. It could be said to be the neatest, as it genuinely discards as many unwanted bits as possible and bringing the separate parts together in a unified whole: one scheme, one system and maximum efficiency. It could also be said to be the most difficult and expensive option.
Chart 2 contains no-punches-pulled questions that advisers and members might want to put to Sipp providers concerned.
Consolidation-lite
That will lead others to close old products and maximise returns on them by minimising expenditure, which is what I refer to as consolidation-lite.
As far as new business is concerned, it has the same appearance as full consolidation, but under the surface the old products still remain. Whether those in the now-legacy products will notice a decline in service or products becoming less attractive compared to newer ones will be a question for them to ponder.
The desire to avoid running legacy books will lead some providers to try and find a third way, perhaps moving different businesses and their respective schemes and products across to one common IT platform across their group.
This route is less disruptive in some regards, but whether it will deliver enough returns is open to challenge – it may be an attempt to have it both ways that later ends up with a move to one of the above-mentioned options.
The last option, and the one that is least likely, is to leave things as they are and run operations in parallel. I cannot see the implied savings on the cost of capital through a reduced capital requirement as being enough to make sense of this option.
However, it is the only option that does not bring new risks in exchange for a lower capital requirement, so presumably the regulator would be in favour.
Andy Leggett is head of Sipp Business Development at Barnett Waddingham
