PensionsMay 31 2013

Sipp trade body reveals concern over alternatives appetite

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Providers of self-invested personal pensions and small self-administered schemes are still showing a ‘surprising’ appetite for alternative investments despite recent scandals and proposed increases to capital requirements.

In a survey of Sipp and Ssas providers conducted by the Association of Member-Directed Pension Schemes at its annual conference, nine out of 10 respondents said schemes should still incorporate alternative investments into their portfolios.

Of about 120 providers, 42 per cent said up to a tenth of a given portfolio should comprise alternative investments, while 48 per cent said alternatives should make up as much as one fifth of a portfolio.

One in 20 respondents said there should be no alternatives in the portfolio whatsoever.

As for how Sipps and Ssas should be sold, about half of respondents (51 per cent) said they should only be sold on an advised basis, with the remainder saying they should be sold on either an advised or execution-only basis.

Just shy of half said they should be marketed only to high net worth individuals, while 53 per cent said they should be available to anybody willing to buy.

Neil MacGillivray, head of technical support unit at James Hay Partnership and honorary secretary of Amps, said: “I’m surprised at the appetite for it looking at things like Harlequin and looking at the capital adequacy requirements.

“Here we have got people quite openly saying they should be open to execution-only and non-advised. There’s still an appetite out there for Sipps and Ssas to take alternative investments.”

He added that he suspects it is the smaller providers who tend to use more alternative investments, despite the proposed capital requirements being based partly on the proportion of such investments a company uses.

Mr MacGillivray’s concern is mostly for lower net worth investors for whom a soured investment could be much more damaging.

“Would you want to put a large percentage of your pension into something like this if you only had £70,000 to £80,000?

“I would have expected the results to be far more cautious. Is this only the tip of the iceberg? Some people say yes it is.”