The self-invested personal pension market is expected to shrink further next year as providers continue their search for firms to take over.
This year the Sipp industry has experienced increased consolidation as many failing Sipp firms were snapped up by larger players in the market.
And the trend is expected to continue into 2020 after large Sipp providers admitted they were actively seeking out Sipp books to acquire and grow their client base.
Stephen McPhillips, technical director at Dentons Pension Management, told FTAdviser: “Dentons will continue to pursue a strategy of growth for the business – both organic growth and growth through selected acquisitions of businesses which offer strong synergies, a good strategic-fit and positive cash flows.”
But he admitted the level of consolidation had not been as high as previously expected as many firms only took over Sipp books which fit with their own business models.
Mr McPhillips added: “As in recent years, the pace of consolidation has fallen short of some industry commentators’ expectations, perhaps reflecting the fact that some providers’ business models hold little attraction for a potential consolidator – unless the business becomes available on highly attractive terms.”
This year saw Hartley pensions snap up a number of failing Sipps' client books.
In September, Berkeley Burke’s administrators announced that the Sipp arm of the business would be sold out of administration in a pre-pack deal with Hartley Pensions.
This came after the company bought the £130m client book of GPC Sipp in August, which entered into administration after it was embroiled in hundreds of customer claims.
Further Sipp takeovers in 2019 included Talbot and Muir’s acquisition of the Sipp and small self-administered scheme business The Pensions Partnership from Group IFA.
This acquisition will add 380 Sipps and 360 Ssas plans to Talbot and Muir’s existing book, taking its total assets under administration to £3.5bn.
Curtis Banks is another Sipp provider that is actively on the hunt for the “right sort of Sipp books and providers”, according to Greg Kingston, group communications director at the firm.
He said there were opportunities as smaller providers realise they can no longer compete in this space.
Mr Kingston said: “As the gap between the standards expected by the regulator and the understanding of those expectations by Sipp operators continues to close, an inevitable conclusion will be reached.
“That is, some firms will realise that there just isn’t sufficient scale or capacity in their business to continue to operate profitably.”
He added with pension transfer business and retail investment flows slowing throughout 2019, providers were now finding it tough to win new business.
Mr Kingston said: “The demographics of many of the older Sipp providers’ books is not in their favour, with the first clients now beginning to naturally leave them, putting revenues under pressure while costs continue to rise."
He added: “There’s very limited acquisition capacity in the market, and that is likely to further pressure realistic valuations of books and business.”
Other Sipp providers said they were moving away from acquisitions, choosing to focus on organic growth instead.
Elaine Turtle, director at DP Pensions, said: “We believe in slow and steady growth and so are not focused on acquisitions, but rather growing our business organically so that we can maintain high levels of service.
“As we grow we will continue to invest in our technology platform and our people. They are our most important asset and it is vital that we continue to develop their careers and recruit into roles as the business needs it.
“We tend to over-recruit so that there is never an issue to service new business or books of business that advisers decide to move to us, which is a growing trend.”
amy.austin@ft.com
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