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Advisers denounce Vanguard Sipp model

Advisers denounce Vanguard Sipp model

Advisers have criticised Vanguard for labelling its new pension wrapper as a self-invested personal pension, despite clients only being able to invest in the firm’s own funds, with several claiming this may cause confusion.

Vanguard entered the pension market on February 19 with its low-cost Vanguard Personal Pension (Sipp). 

The pension wrapper will charge an annual account fee of 0.15 per cent, which is capped at £375 a year and will apply across all an individual’s holdings on the Vanguard Investor platform.

Clients will have access to 77 diversified funds and exchange traded funds, including Vanguard’s Target Retirement Fund and LifeStrategy ranges.

But the product has come under fire from advisers and others in the market for being marketed as a Sipp, despite the only funds being available being Vanguard’s own.

Others in the Sipp market have complained the term 'Sipp' has been attached to many products that allow members to  choose where the funds are invested but in reality they were the simplest of personal pension schemes.

Alan Chan, director and chartered financial planner at IFS Wealth & Pensions, said: “Usually Sipps permit a wide array of investments so it can be misleading for some investors. To add to the confusion, the full name is actually ‘Vanguard Personal Pension (Sipp)’. 

“A personal pension and a Sipp are two different pensions. One of the key differences is the Financial Services Compensation Scheme protection. A personal pension generally provides greater FSCS protection than a Sipp does, which is likely to be limited to just £85,000 per person as it’s all under the Vanguard umbrella.  

“So it could be misleading for this reason too and the Vanguard Key Features is about as clear as mud on this issue.”

William Burrows, retirement director at Better Retirement, said: “As champions of customer choice and better value solutions we should recognise the advantages of a low cost Sipp. 

“But we should argue more than ever that making the best investment or retirement decisions requires advice. It is no use having the lowest cost Sipp if it is the wrong thing in the first place or the investments are not in line with their risk profile and all their eggs are in one basket.”

In response, a spokesperson for Vanguard said: "The Vanguard Personal Pension has been designed specifically as a simple Sipp offering. 

“For too long investors have been poorly served with high-cost, complex investments and services. In contrast, we believe investors have the best chance of meeting their retirement goals through well diversified, balanced portfolios, aligned to their objectives and held for the long-term, at a low-cost. 

“The Vanguard Personal Pension and Vanguard's fund range have been put together with precisely this intention - enabling investors to keep more of their own returns." 

Mike Barrett, consultant at the Lang Cat, said rival platforms may come under pressure to reduce their fees to match Vanguard’s pricing structure. He explained: “For these firms this has the potential to be more painful than simply losing existing clients transferring to Vanguard. However, I don’t expect anyone to drop their fees immediately. It will be more of a case of wait and see.”