The industry is split on the likelihood that the self invested personal pension market will divide into those specialising in higher-risk investments for high-net-worth investors and those providing standardised products to the mass market.
Speaking to FTAdviser, Rowanmoor’s head of pensions technical Robert Graves used the analogy of skiing to describe a two-tier Sipp market.
“Those who want to remain on-piste can do so with the benefit of safety nets like the Financial Services Compensation Scheme, prescribed slopes with degrees of difficulty - or restricted investment options - and the Financial Conduct Authority’s regulatory ski patrol.
“However, for those more experienced in taking on the risk of going off-piste, with regard for ‘caveat emptor’ warnings before they begin, could be given access to a wider range of investment routes, preferably with a mountain guide or financial adviser.”
He argued the incoming capital adequacy rules may take the market back to an earlier state, where mass-market personal pensions are offered by bigger providers with consumers self-selecting from standard options, while more sophisticated investors are catered for by smaller, bespoke operators, offering more niche investments with “lighter touch” regulation.
However, others in the market suggested given the Financial Conduct Authority’s current course, such a scenario is unlikely.
Neil MacGillivray, head of technical support at James Hay and chairman of the Association of Member-Directed Pension Schemes, said: “I just don’t think the FCA would go for it, as it still gives the option of ‘high risk’ investments. As much as going back to the traditional separation of Sipps could be a good move, I think realistically it’s unlikely.”
Mr Graves responded that the diversity of propositions makes it difficult to regulate uniformly, with the result that those at the bespoke end of the market get squeezed unnecessarily by controls meant for the mass market.
Claire Trott, director and head of pensions technical at Talbot and Muir, said there will continue to be “shades of Sipps”, ranging from purely funds on platforms through to investments in intellectual property, unconnected third party loans and unregulated collective investment schemes.
“There really is very little way to avoid holding non-standard assets because of the 30-day rule, if a fund gets suspended and can’t trade for more than 30 days then it is deemed non-standard.
“I think that providers will specialise in areas that they are good at administering, such as property, but we don’t accept non-standard assets into our Sipps and ceased doing this last year. The time and effort in checking if we wanted to take them weighed up against those that we actually accepted meant that it wasn’t worth our while to continue to look at them.”
Jeff Steedman, head of Sipp and Ssas business development at Xafinity, argued that the market re-polarisation has already happened, with bigger insurance companies narrowing their propositions.
This has happened via less commercial property options, with Standard Life no longer accepting Sipp borrowing clients cited, along with refusing to accept an non-standard investments or offering flexible drawdown on legacy products and instead encouraging transfers to their new platforms.