PensionsOct 31 2014

Platforms to have 75% of self-invested pension market

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In five years time platforms will have three-quarters of the self-invested pension market, according to sector expert John Moret, who has compiled data showing a surge in sales of simpler platform-based and ‘restricted’ options while sales of traditional bespoke plans have fallen.

Figures from Mr Moret’s consultancy MoreToSipps show the number of plans on the 22 platform-based Sipps has increased 29 per cent to 562,000 plans in the past year. Platforms now control £57.8bn of Sipp assets, with an average plan value of £102,800.

The number ‘restricted’ choice Sipps, typically sold through life companies, has increased 12 per cent in the last year to 448,000. There are 25 providers who provide the option, with total assets held of £32.8bn and an average value of £73,200.

In contrast, bespoke Sipps have seen the total number of plans fall 3.5 per cent in the past year to 242,000, with total assets of £58.9bn and an average plan value of £244,000.

Overall, the amount of Sipp plans have increased 15 per cent in the last year to 1.25m.

Speaking to FTAdviser, Mr Moret said: “A fall in the number of total Sipps being placed with bespoke providers is a sign of things to come.

“Platforms will have 75 per cent of the Sipp market in market in five years time because they have good technology and ease of use and they also have the monopoly of the adviser market.”

According to Mr Moret’s data there are approximately 223,000 Sipps, around 20 per cent of the market, established on a non-advised basis in the last year.

“This market is growing slowly and I predict more growth there. Most non-advised players are very small and Hargreaves Lansdown has the monopoly of that market.”

Martin Tilley, director of technical services at bespoke Sipp Dentons, told FTAdviser that Dentons continues to take on a “healthy amount” of new Sipps, however almost half of the new Sipps taken on from the first nine months of the year are takeovers from other Sipp providers.

He said: “We are not seeing a drop in demand, but this is partly because we are getting some of ours from others.

“There are fewer purveyors of unregulated assets looking to establish bespoke Sipps and fewer Sipp providers accepting this type of business... [and] the FCA have actually prevented some Sipp providers from accepting certain asset classes.

Mr Tilley said that as well as continued expansion in the platform Sipp market, the distinction between simpler abnd bespoke options would also widen in the coming years as demand for investments such as commercial property and unquoted private equity from some grows.

He added: “Less than 5 per cent of the adult population require a bespoke Sipp. Bespoke Sipps should just be a small part of the marketplace. Only those individuals that really need a flexible Sipp should have one.”

Mr Moret’s data also reveal ahead of the pension changes next year there are around £250bn of unvested funds in Sipps and other personal pensions and a further £250bn unvested in defined contribution schemes.

“There is a total of £500bn of assets, ignoring future savings. There is a huge amount up for grabs.”

Previously, Mr Moret predicted that the radical pension changes announced in this year’s Budget could cause the Sipp market to double in size, adding £150bn in assets by 2017.

According to Mr Moret, the number of Sipp 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.

donia.o’loughlin@ft.com