Pensions discontent has prompted Sipp ‘quasi mis-selling’
Mattioli Woods chairman says Sipps have been sold “over-enthusiastically to too many people”.
Strong growth in the self-invested personal pension market represents a “quasi mis-selling situation” driven by customer disillusionment with the pension industry, Mattioli Woods chairman Bob Woods has claimed.
In an interview with FTAdviser, Mr Woods said the widely-held view is that the minimum amount someone should invest in a Sipp is around £250,000 but that the average size of a UK Sipp is only around £120,000.
According to FTAdviser sister Money Management’s latest survey of the Sipps market, as at December 2011 the average Sipp in the UK is worth £107,242, based on an aggregated value of £88.5bn across 825,190 plans in force.
Mr Woods said that the reason Sipps have become so popular is partly due to client disillusionment with the pension industry, saying that this has prompted them to sold “over-enthusiastically”.
He said: “The Sipp is a great vehicle but it has been sold over-enthusiastically to too many people.
“What it boils down to is expense ratios. You have some low-cost Sipp providers who are competent, but even relatively low fees could be anything from £500 to £1,000.
“If you are a client with a £100,000 Sipp their fee [the Sipp firm] is £1,000, your adviser is charging one per cent and they recommend that your portfolio holds £100,000 of unit trusts [and] the fund managers have their own management charge of around one per cent.
“Three per cent is a big annual expense, whereas if it was a £500,000 scheme the admin fee would be a lot less as a percentage.”