Getting the best value for money
Sipp services have grown in number and permutations. From cheap and cheerful to the full-blown multi-asset experience, advisers must pick the most appropriate from a complex list.
While total pension assets should remain fairly stable at around £750bn, platform assets will rise from today’s £35bn to £125bn – 17 per cent of the total – by 2011. Much of that will go to Sipp services, says adnitor, a financial services platform consultancy.
Karen Forrest, managing director of adnitor, says: “It is clear the platforms are the new gate keepers for pension assets and it will be these that contribute the largest asset growth, but it is difficult to say which is the best in terms of service. Different pension products and services vary greatly from provider to provider.”
The majority of pension investors require relatively few services from their Sipp provider. Unit trusts, bond wrappers and cash meet the most basic needs, with cash particularly important to those spooked by the turmoil in global financial markets.
While cash levels are currently high – some £13bn according to James Hay – the real battle for business is fought over pricing and the range of asset classes on offer. The cheapest deals, with zero initial charges and no management charges, come in the form of direct-investment options, including Hargreaves Lansdown and AJ Bell’s SIPPdeal.
Yet neither service is completely free of charge. SIPPdeal takes £50 for transfers in from other pensions.
It also charges £20 for unit trust and Oeic dealing, while plenty of big names, such as Gartmore, Investec, Jupiter and Scottish Widows do not rebate initial charges in full. A similar situation occurs with James Hay, Hargreaves Landsdown and Cofunds.
Things are more confusing among the more bespoke Sipp services. A survey carried out in March this year for the SIPPcentre, AJ Bell’s advisory service, found a standard case investor faced charges in years one and two ranging from £500 with SIPPcentre and £700 with Hornbuckle Mitchell to over £1600 with Standard Life’s platform.
Those with more complex investments need to face an even bigger challenge. A non-standard investor with two transfers-in totalling £300,000, using a non-panel discretionary manager, a Cofunds account and buying a commercial property, had to swallow charges ranging from under £2000 to over £4000 over the first two years.
Admitting that comparing hypothetical situations is open to criticism of bias, Andy Bell, chief executive of AJ Bell, said at the time: “The only point of any substance I am trying to make is there is a massive disparity between the charges that different Sipp providers levy in the same circumstances.”