The Self-invested personal pension celebrates its 30th birthday this year and upon reaching this milestone can reflect on the journey so far.
Born in the 1989 Budget, the Sipp followed in the steps of the Personal Pension, which had been launched a year earlier.
While the PP was a product solely offered by insurance companies, the then Chancellor Nigel Lawson, wanted savers to have the option of being more involved with how their retirement pot was invested.
By October that year, a fully fleshed out remit for the Sipp was formed.
Ian Neale, director at Aries Insight, outlined the first iteration of the savings product.
“Sipps could permit investment in quoted stocks and shares, including those traded on a recognised overseas stock exchange; unit trusts and investment trusts; deposit accounts; commercial property; and insurance company managed funds and unit-linked funds,” says Mr Neale.
“What was not allowable were connected party transactions including loans, direct investment in residential property or land connected with such a property, and personal chattels capable of private use.”
This all changed in 2001, when the Inland Revenue decided to limit investment choices, only to see this move reversed three years later by the Finance Act.
“While there were to be no restrictions on permitted investments, Sipps, defined in the act as ‘investment regulated pension schemes’, were subject to penal tax charges if they invested in ‘taxable property’,” says Mr Neale.
This term applied to either residential property or ‘tangible moveable property’, which has been open to interpretation ever since.
But despite the fudge around property terminology, the Sipp was gaining a firm footing in the UK retirement sector.
Income drawdown, introduced in 1995, was a key driver, along with the ever-falling annuity rates turning soon-to-be retirees off.
“The regulation of Sipps in 2007 will also have helped them develop into a more mainstream product, giving investors more peace of mind,” says Claire Trott, chair of the Association of Member Directed Pension Schemes.
Over the years, Sipps have also become associated with other forms of flexibility, according to Jessica List, pension technical manager, Curtis Banks.
“They have become the pension products most likely to adapt quickly to changing legislation and to offer as many options as possible within the rules,” she says.
The Sipp market had a significant boost with the unveiling of the Pensions Freedoms in 2014, as a much broader group of consumers were offered – and wanted – flexibility when accessing their pension funds or leaving the money to their beneficiaries.
“There’s now a much wider spectrum of products available that are marketed as Sipps,” says Ms List.
“These range from streamlined options offering fewer investment opportunities but still with flexible withdrawal solutions, through to fully bespoke products which still appeal to ‘traditional’ Sipp customers looking for full control over their pensions.”