After a slow start to life in the 1990s, self-invested personal pensions (Sipps) are enjoying a growth spurt that has now been in train for more than a decade.
The momentum first started in the early years of this century. A mixture of increased life expectancy, falling annuity rates and consumers wanting greater choice over the withdrawal of retirement benefits prompted an increasing number of retirees to gravitate towards Sipps.
Then then 2015 pension freedoms gave the market its biggest boost of all. At the same time, however, regulatory changes and unscrupulous pension arrangements have seen Sipps placed under the microscope.
The latest evidence of this arose in June, when the Financial Ombudsman Service (Fos) released data in its 2016/17 annual review showing the number of Sipps and small self-administered scheme (Ssas) complaints had rocketed by 34 per cent in just 12 months. Tellingly, of the 242 Sipp complaints that were resolved by the Fos, nearly two-thirds (64 per cent) were upheld.
The recent rise in the number of consumers wishing to transfer out of DB schemes, together with the well-documented increase in pensions scams, has ignited further concerns that the Fos may be kept busy for some time. But these cases are not the whole story.
“It is frustrating that the headlines scream ‘Sipp complaints’, whereas in reality there are few genuine complaints at the Fos in respect of the Sipp providers. Most are complaints relating to investments held within a Sipp, made against the financial adviser and predominately in respect of unregulated investments,” says Nigel Bennett, sales and marketing director at InvestAcc.
James Jones-Tinsley, Ssas and Sipps technical specialist at Barnett Waddingham, voices concerns that good quality advisers and long-standing Sipp providers are continuing to be penalised by picking up the compensation tab.
Mr Jones-Tinsley says: “For those footing the FSCS [Financial Services Compensation Scheme] levies, frustration reigns when there are no proceeds of the crime left. Wherever possible, everything should be done to recover these and used to compensate the victims first rather than continuously shaking the levy collection tin in advisers’ faces.
“In the meantime, the functions of the FSCS and the operation of the professional indemnity insurance market remain unaddressed. Why? These are terribly overdue.”
With these issues very much in mind, the Money Management bi-annual Sipp survey delves into the current market and provides an in-depth view of the full suite of Sipp details.
The number of respondents on this occasion has been positive – with a total of 47 providers surveyed – slightly lower than numbers seen in recent editions. This time around, some firms have grouped together their individual products – for example Talbot and Muir, which has grouped its three Sipps into one for simplicity. All of the figures have been recorded up to 31 July, with the exception of Old Mutual’s business volumes that have been taken as at 30 June.
For providers, it is not mis-selling, but capital adequacy requirements that has proven the greatest issue of recent times. The requirements caused something of a stir upon implementation on 1 September 2016. Our April survey provided the first opportunity to see if firms were satisfying the demands of the new regulatory regime.
Questions appear on the last page of this article.