Having historically enjoyed healthy growth and a keen interest from investors, SIPPs have hit a turning point. Laura Suter looks at the market
This survey is normally a tale of increasing assets and success. Long has the SIPP market been praised as the growth sector in pensions – the in-favour option for both mass affluent and high-net-worth clients. It has seen both provider and scheme member numbers rise, while the market spread from its original niche high-end space to encompass platform and simple SIPPs.
However, this appears to no longer be the case, with the data in this survey showing stuttering growth and a drop in scheme numbers. The industry has hit a bump in the road, and how it will navigate it remains to be seen.
In it to win it
This year sees the largest survey yet, but as ever there are a few that did not take part. Those that did not respond but did last year are Aviva, for one of its products that is closing to new business; Attivo, whose SIPP Account has moved to Intelligent Money; and Alico, which said the business is being transferred and only has fewer than 60 customers anyway.
Skandia said that no information has changed since March’s survey and it does not have the additional information we requested, while HSBC is not actively promoting its SIPP, so does not want to be included. Other providers that have not appeared simply did not respond to our repeated requests for information.
Table 1 gives the overview of providers taking part in this year’s survey and all their available plans. This year sees the largest number of providers taking part, with the survey capturing around half of the estimated 120 providers.
With capital adequacy being such a talking point in the industry at the moment, this time around we have asked providers what regime they currently operate under. For investment management or insurance firms this is slightly different, as they have overriding capital adequacy requirements, but for SIPP firms this usually boils down to either six or 13 weeks.
The data in this survey shows stuttering growth and a drop in scheme numbers
Of the 60 firms that revealed their regime, 34 hold 13 weeks of operating money, while 14 hold just six weeks. The remainder have other capital adequacy regimes.
While there has been much talk about the FSA’s moves on capital adequacy and speculation in the industry has been rife as to what level the regulator will raise the requirement to, there have been no official lines released. The FSA says that while it is a badly kept secret that it is looking to reassess the capital requirements of SIPP firms, it has never confirmed this officially and has yet to release any papers on it.
But this does not stop the industry speculating, with proposals widely expected later this year, although implementation is not likely to come until 2013 and even then may be phased.
The consensus appears to be that six weeks of capital adequacy is not enough, meaning that 14 of the survey participants may face tougher times ahead. That said, some stated that while they work under a six or 13-week requirement, they actually carry more capital than that.