Do the new entrants hold merit?

This article is part of
Guide to Sipps

Do the new entrants hold merit?

The self-invested personal pension (Sipp) market is in flux at the moment. Several providers have gone into administration, one of the most high-profile of which is Berkeley Burke.

GPC Sipp also entered administration in June last year following problems with some of the investments in its Sipps.

There have been a number of instances of Sipps holding non-standard or unregulated assets, which is behind many of the industry exits.

But there have been some new entrants into the space, including the likes of Vanguard and Wealthify, ensuring that clients do still have a choice when it comes to Sipp products.

Some of the new Sipps appear to be trying to appeal to those with less wealth to invest but who still want to save for the future.

In March, online investment platform Wealthify marked its entrance into the pensions market with the launch of a Sipp in partnership with Embark.

Clients are able to open the pension product with a minimum £50 investment, while the Sipp has an annual fee of just 0.6 per cent.

Vanguard, which is best known for its passive investment products, unveiled its own Sipp in February which is, according to independent research firm Platforum, the lowest-cost on the market for the average British pension holder who has not yet drawn on their pension.

A 0.15 per cent account fee applies to the Vanguard Sipp, which is capped at £375 across all the accounts in an investor’s name on its personal investor platform.

Sorting Sipps

Faced with numerous Sipp products, it is important for advisers and their clients to differentiate between the newer Sipp offerings, many of which seem to be competitive when it comes to cost.

Tony Stevens, head of paraplanning at Secure for Life, says: “I think the industry has seen a drive to lower costs for some time, and these offerings follow in the well-trodden path of Hargreaves Lansdown, and other self-managed fund and share-based Sipp solutions.”

He observes from the newest launches that it is price rather than features or services that is the driving factor behind them, adding that “there is little functionality to choose between the offerings in this segment”.

“In the adviser space, charges have become very important so any proposition that brings costs down is going to spark some interest,” Adrian Lowcock, head of personal investing at Willis Owen, notes.

“The fact is that it will suit some advisers and their clients but it’s unlikely that they will appeal to all.”

Cost is always a factor, but it is important for people to look at the investment choices available via a Sipp to ensure it is right for them, according to Richard Pearson, director at EQi.

The Vanguard Sipp, for example, offers savers access to 77 funds and exchange-traded funds (ETFs), while Wealthify is offering ethical portfolios via its new Sipp.