Call for review of Sipp rules to consider emerging assets

Call for review of Sipp rules to consider emerging assets

Blend Network has called on the Financial Conduct Authority to update the rules governing self-invested personal pensions to take into account emerging assets.

The property investment platform has said updating Sipp regulations to take account of the emergence of new financial asset classes will help investors diversify their holdings and better navigate economic uncertainties such as Brexit.

Research by Blend Network, found that nearly half (43 per cent) of Sipp holders had shares, this was followed by cash (33 per cent), unit trusts (29 per cent) and investment trusts (22 per cent).

But now there is an emergence of new asset classes such as private equity, cryptocurrency and exchange traded-funds.

Blend Network said clients who have a greater diversity in their Sipp portfolio are more likely to get achieve a better performance even in volatile markets.

Blend Network stated: “It is no surprise that most Sipp holdings are in traditional asset classes, such as unit trusts, listed stocks as these so-called standard assets are more mainstream.

“Also Sipp providers have an interest in their clients holding such assets as the FCA imposes a very significant premium on Sipp providers with regard to capital adequacy for holding non-standard assets, which are typically unregulated investments and unlisted company shares.”

According to Blend Network’s research, exchange traded-funds make up 17 per cent of Sipp assets. 

This type of fund offers investors flexibility as they can be bought and sold at any time of the day, while mutual funds settle after the market closes. 

Exchange traded-funds also have lower fees while being tax efficient as investors have control over when they pay capital gains tax.

Around 7 per cent of Sipp holders already invest in cryptocurrency while others have turned to peer to peer loans.

While investors hold a certain degree of commercial property (7 per cent), exposure through peer-to-peer platforms is less expensive and allows investors more flexibility and to build up a diverse range of holdings, according to Blend Network.

Yann Murciano, chief executive at Blend Network, said: “Alternative investments have become an increasingly popular option for investors who are looking to diversify their portfolios in order to mitigate the risks of an increasingly volatile global economic environment. 

“Yet the regulations around Sipps have not seen any significant change for many years, which makes it more difficult for Sipp holders to consider these alternative investments. 

“We believe that it is time for the regulations around Sipps to be modernised and, in particular for the rules around what is a standard and non-standard asset be updated to take into account of the broad range of alternative asset classes that have now emerged so that investors can diversify their holdings to better position themselves in the midst of the current economic and market volatility.”

But Martin Tilley, pensions director at Hurley Partners, disagreed as he believes Sipp providers would not want to venture into these asset classes.