A surge in the popularity of unadvised self-invested personal pensions is no special cause for concern, according to a former Tory pensions minister and a former Labour pensions spokesperson.
Yesterday (29 March), fintech firm Origo revealed that Sipps had become the most popular destination for pension transfers since pension freedoms were introduced in April 2015.
Given many Sipps are unadvised, this suggested an ever larger number of people were taking direct control of their own pension investments.
But Ros Altmann, who was pensions minister from 2015 to 2016, said it was "not surprising" that Sipps were becoming more popular, and added there was no reason to assume this was a bad thing.
"The Sipp wrapper offers more flexibilities than traditional pensions or annuities, and the whole purpose of freedom and choice is about more flexibility, freedom and choice. Many of the older style products do not allow the new flexibilities," she said.
"Since we don't know how many people are actually getting advice nor what investments they are holding it is difficult to conclude that this is all negative.
"Buying annuities under the old system was very risky and forced many people into an unsuitable product that could have wasted much of their pension savings," she said.
While Baroness Altmann agreed that Sipps came with investment risks, she said this was true of all defined contribution pension schemes.
Gregg McClymont, the former Labour spokesperson for pensions, and current head of retirement savings at Aberdeen Asset Management, also emphasised the positives of the rise of Sipps.
In particular, he said they were an indispensable tool for the self-employed.
"It’s important to remember that for the growing army of self-employed people in the UK a Sipp is currently their only pension option outside of state provision," he said.
He said people liked the sense of control platform-based Sipps provided.
He went on: "It’s important to check charges but for some platforms there is no additional charge for Sipp drawdown in which case a Sipp is a to- and through retirement solution."
However, he said the tendency among retail investors to "buy high and sell low" highlighted the need for advice. He said too few people were prepared to pay for financial advice.
"This is a larger challenge for making pensions freedoms work – I wouldn’t single out Sipps in this respect," he said.
Mr McClymont also pointed out that people who were contributing to a Sipp when they could be contributing via salary sacrifice were missing a trick.
"This is because the tax relief is given at source (rather than reclaimed at a later date through a platform) and the fund costs are often discounted," he said.
Origo's figures came from its Options Transfers service, which facilitates transfers into and out of the UK's contract-based pension providers.
