The impending changes to the at-retirement market have afforded self-invested personal pensions (Sipps) a rare moment out of the pension spotlight. Years of steady growth following the vehicles’ inception in 1989 was followed by an explosion in popularity following 2006’s A-Day, and Sipps were seldom out of the headlines.
Now the products are an established and accepted part of the retirement planning market. But while most attention is focused on annuities’ perceived moribundity and speculation as to which products could replace them, there are still big issues facing Sipps. Capital adequacy rules, threatened consolidation and new regulation on non-standard assets all cast a shadow over the market.
In light of this, we used this month’s Intelligence survey to garner your thoughts and gauge how much these issues worry advisers – if at all.
Regulatory focus
As always we sent a simple survey of 10 questions to our readers, to complete anonymously. The first question addressed the perceived regulatory focus that Sipps have endured, asking what impact continual regulatory tinkering had on respondents’ thinking. Over a third said it had no impact but of those who admitted to changing anything in response, the most common effect was a review of due diligence, cited by 59 per cent of all replies.
Small but significant
A small but significant 13 per cent said regulatory focus had led them to reconsider whether they recommend Sipps at all.
Given the growing importance of due diligence for advisers in choosing Sipp providers, we asked next how often they undertook due diligence on a chosen provider. Of the respondents, 36 per cent said they performed the check every time they made a new recommendation while a further 30 per cent said “at least annually”. One in eight had outsourced the process.
The debate around standard and non-standard assets in Sipps formed the background to the next question, as we asked whether advisers took into account whether investments were standard or non-standard.
A massive 94 per cent said they did, with 69 per cent explaining the difference to the client too. Of the 6 per cent that professed not to consider whether assets were deemed standard or not, all said they still explained the difference to clients.
This was borne out when we asked who respondents thought the classification of investments was primarily an issue for. Just 3 per cent believed that only Sipp providers should worry about it, while exactly three quarters said providers, advisers and clients should all be concerned. Despite us not including the FCA as an option, a handful of respondents used the ‘other’ option to state that classification should also be an issue for the regulator.
Consolidation among Sipps providers has long been touted as likely, and a slight increase in frequency of buyouts in the past year or two has suggested this might finally be realised. We asked the extent to which the threat of an adviser’s chosen Sipp provider being bought out influenced recommendations.
The overwhelming majority (68 per cent) said that, while it was a factor, it was unlikely to affect any recommendation. Of the remainder about two thirds said they definitely would not recommend a Sipp provider that was likely to be bought out, while the rest (11 per cent) said speculation about potential merger and acquisition activity had no impact at all on their recommendations.
Influencing factors
When asked to list influencing factors in choosing a Sipp provider, cost transparency was clearly most important as 49 per cent placed it first and 40 per cent second.
Perhaps equally notable was that all other technical details were overshadowed by whether the adviser had personally enjoyed previous good experience of dealing with the provider, which was clear as the second most important factor.
Interestingly, over half of respondents cited the Sipp being available through their platform as the least important factor in choosing.
When we asked about the practice of retaining interest on cash deposits, there was a slight inconsistency with how advisers view Sipps doing this compared with platforms. Exactly the same numbers – 11 per cent and 7 per cent respectively – said they were either not concerned at all or that it did not influence their choice whether regarding Sipps or platforms. However, while 30 per cent said they would not recommend a Sipp provider that retained interest, 34 per cent applied the same approach to platforms.
We also asked, perhaps bravely, about the value of Sipp providers’ spokespeople and their role as pundits in the trade media.
Fortunately 65 per cent said that their comments were interesting, although only 6 per cent said they were likely to influence recommendations. There was 17 per cent that dismissed the commentary as “mostly inward-looking, self-serving or of little interest”, which probably serves us right for including it as an option.
Bright future?
Finally, we asked for advisers’ views on the outlook for Sipps. Encouragingly, 68 per cent said the future was bright for the whole market. Of the remainder, four times as many thought the outlook was better for platform Sipps as for independent bespoke models.
Only 8 per cent felt the market would suffer from pensioners exploiting their new freedoms to make sudden and rapid withdrawals.
Click here to see all of the data as Charts from the survey.
