As you have probably heard, pensions have been undergoing quite an overhaul lately.
But before the newly introduced freedoms and auto-enrolment were announced, the steady growth of self-invested personal pensions (Sipps) was the biggest story in retirement planning.
The products had slowly grown in popularity in the 25 years, and this growth has continued even while the sweeping regulatory changes have stolen the headlines. But what are advisers’ view of the market? Do they see prospects for ongoing growth? Are they worried by rumours of consolidation? And what about the classification of Sipp assets? A year on from the first research, we used our Intelligence survey to assess how you see Sipps, sending a questionnaire out to our subscribers to collate your opinions.
The first question addressed the regulatory focus on the Sipp market, asking what impact it had, if any, on how they approached the products. Almost half of advisers – 44 per cent – said they had updated their due-diligence process as a result. This was the most popular answer but still represented a drop from the 59 per cent who gave it as a reply last year.
Almost a fifth – 19 per cent – identified the regulatory focus as a reason behind them reconsidering whether they should recommend a Sipp at all, an increase from 13 per cent last year. Perhaps most significant, the second most popular response with 41 per cent was that the regulator’s attention on Sipps had not had an impact on how they went about their business at all.
While due diligence was professed to be an area on which respondents were more likely to focus, the number who undertake due diligence on every new Sipp recommendation has dropped from 36 per cent last year to 26 per cent this. The other options appear largely static compared with last year. The most common answer was that due diligence was undertaken at least annually with 37 per cent.
When it came to the debate between standard and non-standard assets, 94 per cent took into account the difference when making investment decisions. Over half of these – 52 per cent of the total – took the trouble to explain the difference to their clients too. Just 1 per cent took no notice of the distinction and did not bother troubling their client with the distinction either.
When asked who the distinction was chiefly an issue for, a clear majority – 77 per cent – said Sipp providers, advisers and investors should all be equally concerned. There was 4 per cent that said it was just an issue for the Sipp providers to worry about. The handful (4 per cent) who said ‘other’ most commonly identified the regulator.
Consolidation
Our next question addressed consolidation in the Sipp market, and asked respondents how worried they were, if at all, by the prospect of a spate of mergers and acquisitions among Sipp providers. Just over a third stated that they would not recommend a Sipp provider that they felt was likely to undergo a change in ownership; while 55 per cent said it was a factor, but would not make them any more or less likely to recommend a specific provider. The remaining 11 per cent said such speculation would not affect their recommendation at all.
Question 6 asked respondents to rank a number of features in order of importance when choosing a Sipp. The results showed similar responses to last year, although the use of a third party comparison service such as Defaqto is now about half as likely as last year to be the most important thing advisers look for (8 per cent compared with 15 per cent last year) and is over twice as likely to be considered least important (8 per cent versus 19 per cent).
Total cost was still the priority for most advisers and the proportion that placed it first in order of importance rose slightly from 49 per cent last year to 57 per cent this. A further 30 per cent placed it second this year.
Past experience of good service remains an important factor in choosing a Sipp though, and comfortably recorded the second best figures.
The practice of some Sipp providers retaining interest was covered next, as we asked how advisers viewed it and 7 per cent were not concerned at all. This represented a slight drop from last year’s 11 per cent. This was more than mirrored by an increase in those who said categorically that they would not recommend any Sipp provider that retained interest, from 30 per cent to 38 per cent.
The remainder said the practice did not influence decisions at all, but the majority of them did view it as part of the Sipp’s overall cost.
Sceptical
When asked about the various high-profile Sipp commentators who appear regularly in the press, advisers profess to being sceptical. The number who said they would recall these pundits’ words when making a recommendation has risen from 6 per cent to 11 per cent, but the overwhelmingly most popular answer was that, while they were interesting, the soundbites would not influence the respondent’s recommendations, with 55 per cent.
A significant 30 per cent were less charitable, saying that the topics discussed were inward-looking, self-serving and of little interest, which probably serves us right for including that option.
Finally we asked advisers for their views on the future of the Sipps market. Most found cause for optimism with the 64 per cent stating that the future looked bright broadly in line with last year. However, while a minority, the number who anticipated Sipps as a whole suffering from consumers rushing to exploit the pension freedoms rose slightly from 8 per cent to 10 per cent.
We should point out that some advisers did not see the questions as relevant to the way they do business. One, David Hearne of Satis in London, argued that, “It’s just not the way we think of Sipps. As a planner I am thinking about retirement not pensions.”
Maybe the growth of Sipps has been more significant as part of a homogenous whole retirement market, rather than as one standalone product which has encroached on all others. If that is the case, it seems likely that the new freedoms-dominated landscape will see Sipps continue to pay a significant part, but their flexibility will ensure they are part of a bigger solution. They may still get the lion’s share of attention in the press though.
