Anthony Hilton: FSA's clampdown will shake up Sipps sector

Though you may never have heard of it, Dentons is one of the leaders among administrators of Self Invested Personal Pensions. And on Tuesday it put forward enough smart ideas to show that it remains several notches above most of the competition.

Not that the firm may have to worry about this for much longer because the stage is being set for a massive shake-out in the sector. The Financial Services Authority has developed new rules which in some cases may require a tenfold increase in the amount of capital which these firms will have to set aside to protect their clients from any losses resulting from administrative failure.

But most of these firms are small, they have little capital and they are not profitable enough to attract it from outside.

To many therefore the regulator's action seems out of proportion to the nature of the likely risk. But it has also been noted that the firms hit hardest tend also to be those which allow their clients to put money into the most exotic range of investments. So the suspicion persists that it is driven by a desire to clamp down on some of the more exotic forms of tax avoidance.

There are about 180 in this organisation and the prediction is that within a year or two there will be under 20, the rest having gone bust, wound themselves down or sold out to one of the big firms.

A degree of disruption and uncertainty for their clients seems inevitable at this busy time at the end of the tax year so it is something for potential new clients to bear in mind.