PensionsApr 11 2014

Budget changes will double size of Sipp market

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Radical changes to the pensions regime announced at the Budget will provide a boon for the self-invested pension market that could see it double in size adding £150bn in assets by 2017, according to one of the industry’s leading experts.

The number of self-invested pension plans and assets will double their current level over the next three years to 2m and £300bn respectively due to the “opportunities” the Budget has created, John Moret, the industry veteran widely known as ‘Mr Sipp’, told FTAdviser.

Chancellor George Osborne announced radical pension changes in his Budget speech, stating that “no-one will have to buy an annuity” and that from age 55 a person’s entire whole pension fund can be withdrawn as cash without unauthorised tax charges.

The changes are subject to consultation and due to be implemented in April 2015

Mr Moret, principal of consultancy business MoretoSipps, said this flexibility removes a barrier to access and will make pension savings “more attractive”.

He believes there will be a “surge” in Sipp plans, adding that platforms will be the “major beneficiaries” of this new Sipp investment, “although it may be at the expense of some other existing platform assets”.

Mr Moret said: “Whilst we may see a small number of Sipps totally liquidated I think it’s more likely we will see other savings such as Isas being reinvested into pensions along with transfers and new monies, subject to the annual contribution limits.

“Some of this will go into top-ups to existing Sipps, while others will take out a Sipp for the first time. For those approaching or already aged 55 the attractions of saving via a pension are particularly compelling now there will be immediate access to the accumulated pensions savings.”

Mr Moret said he expected the non-advised Sipp market to benefit strongly from the changes and to “grow far faster than it has to date”.

According to Mr Moret’s data, there are now 1.2m Sipp plans with assets now hitting £150bn. This is made up of 270,000 “full choice” Sipps, with assets of £70bn; 430,000 “restricted choice” Sipps, with assets of £30bn and 500,000 “platform-based” Sipps, with assets worth £50bn.

Mr Moret said: “Over the last 12 months the market grew by 14 per cent if measured by number of Sipps and by 20 per cent if measured by assets. Unsurprisingly the platform based segment is growing fastest.

“I am slightly surprised that the market overall continues to grow at 14 per cent by numbers. Given the regulatory uncertainty I would have anticipated a decline in the growth rate to perhaps 10 per cent per annum.

“The opportunities look to be enormous and I expect the non-advised Sipp market to grow far faster than it has done to date. At the moment I estimate that less than 20 per cent of Sipps are non-advised.”