They offer much more control than the average personal pension and allow a wider variety of asset classes with which to invest.
Also they allow clients to borrow money to invest in other assets, which may help if a client wants to invest in commercial property. There are many other asset types that a client can invest in if he or she has the wherewithal to do so, and as such they are not bound by the stricter rules of conventional personal pensions.
But Sipps are nonetheless regulated and closely watched by the FCA. Under the former guise of the FSA, there have been several reviews of Sipps, in terms of how they are sold, and advised upon, whether the providers are looking after clients in the correct manner and more recently the capital standards that Sipp companies have.
Due to their popularity, many Sipp administrators have sprung up, and there are scores of them, many doing little actual Sipp business. The regulator has been worried about the implications of a potential collapse, and whether there is enough capital to keep a business going should it need to wind itself down.
Nonetheless, Sipps have done well in a time when the pensions industry has had to deal with mis-selling and undersaving. The future looks just as promising.
Hal Austin is editor of Financial Adviser