Every once in a while, we like to do something out of the ordinary – get a new hairstyle, take a different route to work – as it makes a nice change.
But should pension savers be thinking out of the box when it comes to generating as much income as possible for their retirement?
Since the introduction of the self-invested pension plan some 30 years ago, savers have had control over where their retirement savings are invested.
Instead of relying on an insurance company to find suitable assets and produce a regular return, owners of a Sipp had a world of investment opportunity available them.
Since 2016, this investment world has been split into standard and non-standard assets – and savers need to be acutely aware of which they are going to hold in their portfolio.
Standard and non-standard assets
“Essentially, a standard asset is anything that is readily realised within 30 days, easy to get hold of, more likely to be accessible when you want it and at a value you want it to be,” says Eddy Woore, team director, Mattioli Woods.
“Examples are cash bank accounts, regulated unitised funds and shares listed on recognised stock exchanges.”
A non-standard asset, on the other hand, is anything not deemed standard, including illiquid and hard-to-sell items.
“Some non-standard assets are simply longer-term deposits not available within a month, which means they are technically breaching the Financial Conduct Authority’s definition of a standard asset,” says Mr Woore.
“It could arguably also include – because it might not be readily marketable within a month – commercial property, although quite often, the properties can simply be at auction.”
It is these non-standard assets that have hit most of the headlines, mainly for the wrong reasons.
Equity and bond markets go up and down, but esoteric investments are where most of the problems for savers have been found.
“Given the plethora of non-standard investments available for possible Sipp investment over the years, and the inherent risks which can attach to some of these, it is regrettable, but almost inevitable, that some investments have failed,” says Stephen McPhillips, technical sales director at Dentons Pension Management.
“It is natural that only the failed investments come under the spotlight, as answers are sought around the reasons why.”
Several such failed investments have gained media, court and claims management firms' attention over the past few years.
One of the latest events was an appeal brought by Berkeley Burke in late 2018 against a decision from 2014, in which the Financial Ombudsman Service ruled the Sipp provider had to compensate a client after it failed to carry out adviser-style due diligence on his investment.
“What the FCA in some cases court cases has been concerned about is the higher risk non-standard assets promoted by mostly, but not always, non-regulated introducers, which are facilitated by a Sipp administrator,” says Mr Woore.