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Guide to Self-Invested Personal PensionsWhich clients are suitable for which Sipp
“A self-invested personal pension is a type of personal pension that gives you control of your pension fund, allowing you to make decisions on how your funds are invested within a range of opportunities,” says Robert Graves, head of pensions technical services at Rowanmoor Group.
He explains that these pensions are designed for individuals who want the flexibility to control their pension fund investments while they are building up their retirement fund and when they take their benefits from it.
The flexibility is produced as the pension essentially is a tax wrapper around a much wider variety of investments than stakeholder pensions and many personal pensions, says James Sumpter, wealth management director at Bestinvest.
He points to the two ends to the Sipp spectrum: “You can opt for a basic Sipp allowing you to select your own investments from an investment platform and deal online, through to bespoke Sipps which specialise in administering commercial property and private company shares, and allow underlying assets to be managed on a discretionary basis by an adviser.”
Hyman Wolanski, managing director of Sippchoice, notes that there are also now a middle way. “These may offer a limited number of platforms or they may be a platform and offer a bit more than just a platform. They might offer a wide range of discretionary fund managers – so if you want a particular fund manager who’s on that platform.”
Mr Wolanski says Sipps are suitable for any client who’s interested in investments.
The suitability decision lies with both client and financial adviser, states Mr Graves: “The purpose of a Sipp and in particular an ‘unbundled’ bespoke Sipp is to provide the consumer with investment flexibility. Sipp operators are not there to give investment advice.
“The suitability of Sipps has widened as different Sipp products have come to market, offering individuals a choice of investment opportunities, service propositions and fee structures. Sipps have universal application in that they can be suitable for the employed, partners, self-employed, unemployed and minors.”
Clients who could or should transfer into a Sipps are those who feel their existing pension is restricting their choice of investments and flexibility.
Mr Wolanski adds that Sipps can also be used for consolidating: “Pensions are a bit of a black hole for many people; they feel they’re too complicated. When a client has a number of different pensions, if they consolidate in a Sipp they can begin to get an understanding of what they’ve got.”
Before transferring an adviser should check for any transfer penalties, the benefits they are entitled to on their existing pension and the charges for setting up a Sipp, concludes Mr Sumpter.
