On 22 June 2026, the FCA published Consultation Paper CP26/20: Adapting our rules for a changing market: self-invested personal pensions (CP26/20), in response to the substantial growth in the size and complexity of the SIPP market. CP26/20 proposes two related sets of new rules. The first introduces explicit, risk-based due diligence obligations for SIPP operators in respect of the third parties they engage with and the assets accepted into a SIPP. The second, which is the focus of this article, introduces a new Pension Scheme Money and Assets (PSM&A) regime for firms that use unauthorised trustees to hold or receive scheme money and assets. This is the second of two articles on CP26/20. Our first article, which can be accessed here, considered the proposed due diligence requirements in detail, including the tiered approach to third-party and asset-level checks, against the backdrop of case law such as Adams v Options SIPP and Berkeley Burke v FOS, and the FCA’s earlier Discussion Paper DP24/3. This article turns to the second limb of the consultation: the proposed PSM&A regime.The second limb of CP26/20 addresses the aforementioned structural gap in the current regulatory framework meaning that, depending on the structure of the scheme, the FCA’s Client Assets Sourcebook (CASS) does not apply, leaving pension scheme money and assets without CASS protections. Instead, such firms are subject to high-level obligations, such as those found in the FCA’s Senior Management Arrangements, Systems and Controls sourcebook or the Principles for Businesses. The FCA highlights money and assets held by unauthorised trustees and third parties in particular as areas of risk, as unauthorised trustee companies are outside of the FCA’s regulatory perimeter. The FCA did consider whether to apply CASS requirements to firms not currently subject to it. However, it has ultimately concluded that this would require significant changes to the CASS framework and means that firms would have to stop using unauthorised trustees in pension scheme structures.
Therefore, the proposed PSM&A regime would apply where a SIPP operator uses an unauthorised trustee to hold or receive pension scheme money or assets; it would not apply to monies or assets already subject to CASS.
The regime would impose requirements in a number of key areas, which may represent operational and financial challenges for some SIPP operators:
- Secure holding: Pension scheme money and assets must be held securely, with appropriate segregation and safeguarding arrangements. The FCA propose two categories of pension scheme money:
- Directly held scheme money: money held within pension scheme bank accounts in the name of the unauthorised trustee; and
- Indirectly held scheme money: money held other than in a pension scheme bank account by a third party for or on behalf of the unauthorised trustee.
- Firms must allocate directly held scheme money to individual pension, fund or arrangement promptly and in any case no later than 10 business days after receiving it. Until then, it should be recorded as ‘unallocated scheme money’.
- Record-keeping: The FCA proposes new record keeping requirements for operators, facilitating more accurate calculations of money required to be held by the scheme, requirements to identify where that money is held, and to carry out regular reconciliation checks to ensure that records reflect the true position of the scheme’s assets. The FCA acknowledges that some schemes will need to develop new systems or processes to achieve compliance. These record-keeping obligations should be read together with the due diligence expectations on SIPP assets themselves — including verifying proper custody and good title — which are discussed in our first article here.
- Firms would be required to maintain a sufficient level of records to enable them to clearly distinguish which assets are held for which member. This includes recording and maintaining investment and transactions data (including those by third parties) to ensure that data on holdings is up to date.
- Valuations and Reconciliations: Firms would be required to be able to reconcile their internal records of pension scheme money held by third parties on a daily basis through a comparison of two new, internal records:
- Scheme money resource: The aggregate balance of trustee bank accounts and amounts held by other third parties; and
- Scheme money obligation: The total amount of money the scheme requires to fulfil its obligations to members.
- Any discrepancy must be promptly investigated and rectified without delay, engaging with third parties as appropriate to resolve the shortfall. If the firm expects that a material shortfall is not resolvable within a reasonable timeframe, they would be required to notify the FCA in writing without delay.
- Where a firm chooses to maintain separate aggregate asset holding records to verify the accuracy of its internal accounts and records, it should have in place a monthly reconciliation process to ensure accuracy between the two records and identify discrepancies not ordinarily detected through baseline systems alone.
- Audit requirements: A complete audit trail, based on accurate records, must be maintained, enabling the regulator or an insolvency practitioner to trace the movement of assets. Firms will be required to conduct an annual audit and produce a scheme report which states whether the SIPP has maintained adequate systems and controls and whether the SIPP operator is in compliance with the rules. Firms will be required to provide these reports to the FCA at the FCA’s request.
- Relationships with third parties: As mentioned above, firms will be required to set out terms of business with relevant third parties, which set the terms on which the third party holds assets. Firms must exercise due skill, care and diligence in selecting, appointing and reviewing third parties on an ongoing basis. This obligation runs in parallel with the core and additional third-party due diligence requirements proposed for introducers, advisers and DIMs, which we examine in our first article here.
- Senior manager responsibility: Firms will be required to allocate a senior manager to have oversight of the regime, taking accountability for the firm’s compliance with the PSM&A rules; ensuring that there are sufficient systems and controls in place in regard to the scheme’s money and assets; and reporting to the Board or other governing body of the firm accordingly.
- Notifications to the FCA: In addition to notifying the FCA of discrepancies or material shortfalls, firms would also be required to notify the FCA without delay where it identifies that it has materially out of date internal pension scheme money records, it is unable to conduct an internal or external pension scheme reconciliation, or where it has received material adverse audit findings in the relevant period.
- Reporting: The FCA will work with firms to “assess and define the appropriate reporting regime from the PSM&A regime”. Any future reporting would draw on information that firms would maintain under the maintenance of records, reconciliation and valuations requirements set out in the CP.
Timelines
The FCA has proposed a two-year implementation period for firms to implement the new rules or exit the industry where they are unable to meet the minimum requirements of the regime. For operators with existing third-party relationships, a further one-year period may be available, as needed.
The FCA has indicated that it expects to publish final rules in the first half of 2027, subject to the outcome of consultation.
Conclusion – What should SIPP operators do now?
The consultation period presents an important opportunity for firms both to influence the shape of the final rules and to prepare for their implementation. We recommend that SIPP operators consider the following steps:
- Respond to the consultation. The deadline for responses is 24 August 2026. Operators with concerns about proportionality, the scope of the third-party due diligence requirements, or the adequacy of the transitional period should make their representations during the consultation window.
- Conduct a gap analysis. Firms should assess their current due diligence processes against the proposed rules to identify gaps.
- Assess third-party relationships. The proposed rules on introducer, adviser, and DIM due diligence will require firms to formalise and document their third-party oversight arrangements. Firms should begin scoping this work now, particularly where legacy relationships may not be adequately documented.
- Evaluate PSM&A readiness. Operators using unauthorised trustee structures should assess whether their current arrangements for holding, recording, and reconciling pension scheme money and assets meet the proposed standards.
Read together with our companion article on the judicial expectations of SIPP operators, CP26/20 confirms a convergent trajectory: the courts and the regulator are aligned in expecting that SIPP operators take meaningful steps to ensure that the investments they facilitate are genuine, credible, and not vehicles for fraud. The consultation paper now gives operators the opportunity to shape the detailed rules that will govern this obligation for the foreseeable future.
Our team of Financial Services Risk Advisory professionals has extensive experience of supporting firms in connection with risk management arrangements within the investments and wealth sector, and we would be pleased to discuss ways we can support firms grappling with the organisational and governance implications of these proposals.