Consolidation between Sipp providers to accelerate

According to Premier Pension Services (PPS), the next 12 months will provide a tough challenge for independent Sipp providers as the market's landscape evolves.

Nigel Manley, head of self invested pensions, Premier Pension Services, said: "The dynamics of the market place are changing and only those firms with robust controls and an awareness of the full scope and expectation of regulation will survive.

"The first driver for change will be the pure economics of the market size that independent Sipp providers are competing in.

"The Financial Services Authority (FSA) Product Sales Data Trends Report in September shows that 37,000 Sipps were sold in the period from the 1 October 2007 to the 31 March 2008.

"Alarmingly the report goes on to state that of this number, some 25,000 were sold by just the top 5 providers.

"With some 100 providers reporting, this means that the other 95 are scrapping for just 12,000 plans and on the basis that the distribution is not even then the report poses some interesting questions about the future of many independents."

PPS has been predicting consolidation in the Sipp provider market for the last two years and although the firm admits that this has not been as evident as they would have expected, the next year will be a real challenge.

Manley said: "Consolidation has been much slower than we had expected but I believe this will now accelerate. For some independent Sipp providers the next 12 months will be a real challenge with the combination of fierce competition in a market where FSA pressure will challenge the suitability of Sipp against personal pension, and regulation finally beginning to bite.

"A Sipp has been shoe-horned into the regulation of a personal pension and for the insurers this is something they can readily adapt to with systems and controls that have been in place for years.

"The same cannot be said of the independent Sipp provider where there remains an element of the 'cottage industry'."