Pensions  

Sipps clear winners from pension freedoms

Sipps clear winners from pension freedoms

The proportion of pension transfers that go into self-invested personal pensions has doubled since the introduction of pension freedoms two years ago, figures from Origo have revealed.

The fintech firm, which is owned by a group of life offices, reports that 43 per cent of the pension transfers it facilitates are now going into Sipps.

That was up from 21 per cent before April 2015, when the new freedoms came in.

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Transfers into annuities, meanwhile, took a huge hit, plunging from 38 per cent of transfers before March 2015 to just 7 per cent in the period up to February 2017.

Origo's Options Transfers service facilitates transfers into and out of the UK's contract-based pension providers.

With 90 providers using the service, including all the major life companies, pension consultancies and plaftorm providers, Origo's figures provide a comprehensive industry overview.

The huge increase in demand for Sipps led Origo to declare the sector the "clear winner" to come out of the shift to pension freedoms.

The scrapping of compulsory annuitisation - the key feature of pension freedoms - has left annuities as the product least transferred-into, alongside group personal pensions.

Individual personal persons were the second most transferred-into after Sipps, accounting for 30 per cent of transfers.

Income drawdown was the third, accounting for 8 per cent of transfers. Before 2015, income drawdown did not even register in Origo's figures.

Paul Pettitt, managing director of Origo, said: "Since the pensions freedoms were implemented in April 2015 there has been a clear trend to move into pension vehicles that can help pension holders make the most of the greater IHT and drawdown flexibility offered under the new rules.

"When it comes to pension vehicle popularity since April 2015 it’s all been about Sipps," he said.

Financial advisers have generally corroborated Origo's findings on annuities, with most saying the seldom if ever direct their clients into annuities.

However, pensions consultancy Aon Hewitt recently revealed one in three defined benefit transfers it was overseeing were still going directly into an annuity, despite the scrapping of compulsory annuitisation. 

james.fernyhough@ft.com