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FCA figures reveal Sipp market contraction

FCA figures reveal Sipp market contraction

The number of self-invested personal pension providers is down by a quarter, according to the Financial Conduct Authority's Product Sales Data Report, as mergers and closures see competition shrink.

Sipp providers dropped 25 per cent from the second quarter of 2015 versus the second quarter of 2016, Chris Jones, principal at Rock Consultancy told delegates at the Associated Member Directed Schemes conference on 21 September.

The total number of Sipp providers fell to 75 during that period.

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According to Mr Jones, in the first quarter of 2015, 99 firms wrote new Sipps, however by the end of the second quarter in 2016, the number had dropped by about a quarter to 75. 

He attributed the drop partly due to firms closing down and partly as a result of mergers within the industry, adding that bespoke self-invested personal pensions are growing but at a much more sluggish rate.

In the second quarter of 2016, according to Rock Consultancy's research, a total of 770,783 Sipps were written between the third quarter 2015 to the second quarter in 2016.

Major player Hargreaves Lansdown administered 276,000 Sipps as at 30 June 2016 and the equivalent figure as at 30 June 2015 was 231,000.

Consequently, Hargreaves Lansdown's Sipp count went up by 45,000 during the year from 1 July 2015 to 30 June 2016.

Referring to the FCA's new new capital adequacy rules for Sipps, which came into force at the start of this month, Mr Jones estimated 14-18 per cent of affected firms would exit the market.

"We’ve already seen around more than a quarter of affected firms leave the market, even before the new capital adequacy rules took effect, and more firms have exited since," he said.

"Rock Consultancy estimates that the overwhelming majority of new Sipps are streamlined, investing via a platform or other focused investment options, but the number of traditional bespoke Sipps (which allow a full range of investment options) is also growing, albeit more slowly."

In July this year, the Financial Services Compensation Scheme warned a recent dramatic spike in claims relating to poor advice given on non-standard investments held within self-invested personal pensions is likely to continue.

The FSCS revealed that, during the 2015 to 2016 financial year, it paid out £83.8m on life and pensions claims, 92 per cent of which related to non-standard investments - such as unregulated offshore property - held in Sipps.

That was twice the 2014 to 2015 figure of £35.2m, which itself was twice the 2013 to 14 figure.

The FSCS was unable to provide insight into why there had been such a marked rise in claims relating to non-standard investments. However, a spokesperson told FTAdviser that it was not a one-off, saying: “We believe the trend will continue.”

He confirmed the FSCS had already received a significant number of similar claims for the new financial year.

The spotlight has also fallen on Sipps for their management of client cash. 

Earlier this month, FTAdviser reported that a wide variance exists in the amount of interest payments self-invested personal pension providers take from investors’ cash holdings, swinging from nil to 1 per cent.