Opinion  

Sipp success needs more transparency

John McCreadie

Sipps have been one of the success stories of the launch of pension freedoms with the number of transfers more than doubling since April 2015, according to industry figures.

Origo, which runs the Options Transfer service says Sipp transfers have increased 115 per cent under pension freedoms and the introduction of tough new capital adequacy rules has helped strengthen the sector’s reputation.

The new rules ensure an orderly transfer of business if a Sipp operator folds and allows more time for Members and their financial advisers to mitigate the problem by sourcing alternative arrangements in good time.

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Providers could be forgiven for patting themselves on the back – but it makes more sense to look at why the new rules were introduced and to tackle the root causes which are transparency, strong governance and pricing simplicity.

The new rules were needed because, sadly, too many providers were not meeting the standards that clients and advisers have a right to expect.

For too long we had seen some providers clouding the very industry in which they were operating, with hidden fees and endless pages of unclear charges. Even worse, too many did not have the capital to tide them over during difficult times.

They were damaging the reputations of companies which prided themselves on full transparency in charges and operations and on offering a simple fee structure clearly presented on a single page rather than endless reams of confusing figures almost impossible to digest.

In the run-up to 1 September 2016, the pensions sector witnessed a steady stream of mergers and takeovers. Figures from the FCA show that, in the year to the end of June, a quarter of the UK’s Sipp brands simply disappeared. Meeting the new requirements and administrative standards were too much for many operators.

Providers that are committed to transparency will continue to see opportunities in the UK, despite this consolidation in the market, by promoting and designing clear products designed purely to meet the needs of advisers’ clients. 

While the advent of robo-advice, technology is changing the way we work, but operators will never lose sight of the importance of providing advisers with solid face-to-face support from committed business development managers who don’t hide behind the latest technology or do-it-yourself solution.

Hand-in-hand with clear charges and governance, providers need to ensure clients can move between a suite of bespoke Sipp, Ssas and Qrops with no transfer or exit cost should their circumstances change. 

And let’s not lose sight either that it’s not just about the size of the fee – it’s about the specific value-add that the client receives from the fee in line with the service model of their adviser.

While the cheaper end of the Sipp market may well suit some people, it doesn’t always take into account the client-centred approach taken by many providers who genuinely strive to provide bespoke advice, solely revolving around the needs of clients in return for a fair, transparent fee.