Andy Bell: The starting point for me was income drawdown in 1995. Then in 2000, we saw the UK’s first online Sipp launched, which set the scene for the polarisation of the Sipp market.
The demise of Equitable Life was also a key driver of Sipp popularity. Pension savers began to see traditional, insured personal pensions in a different light and that really played into the hands of the Sipp market.
But probably the biggest influence occurred with the proposal in the December 2002 green paper on pensions simplification to allow residential property and other esoteric investments to be held as a pension scheme asset. This massively increased the press exposure of Sipps up to and beyond December 2005 when the government announced their U-turn on this issue. However, the genie was out of the bottle, and this was the catalyst for Sipps being elevated from being a niche to a mass market product. Finally, A-day in 2006 and regulation in 2007, both helped in different ways. The former in making pensions more attractive and the latter in providing a welcome regulatory framework for this sector of the financial services market.
John Moret: I think I’m right in saying the very first, genuine Sipp – ie under what was the new legislation back in 1989 – was set up on February 28 of that year. I certainly agree that the retirement options space starting with drawdown and its various iterations has had a huge impact on the market.
Life companies generally, for a variety of reasons, have had to rethink their approach to personal pensions, as the commission models are unsustainable and that has driven a number of what were the major personal pension players into the Sipps space. We have seen the platforms emerge but they have only really started to gain traction in the Sipp market specifically in the last two to three years.
If you wind the clock back to when drawdown arrived in 1995, there were probably less than 50,000 Sipps at that time, maybe even 25,000. However you define a Sipp these days, it’s very clear that in the space of 15 years there’s been a tenfold-plus increase in numbers, which compared with almost any other part of the financial services market is pretty spectacular.
Pádraig Floyd: There has been a proliferation of offerings with the bigger players coming to the market, so what should people be looking for?
Moret: There is a world of difference between the online Sipp proposition and the full-blown, bespoke Sipp. Now that all Sipps are regulated, there is a need for advisers to undertake a degree of due diligence on their providers. That would encompass things like experience, financial strength and, as best they can, to gauge systems and controls, and a good understanding of the regulatory framework the Sipp providers are operating under, particularly the compensation arrangements. This can be unnecessarily complicated, but is nevertheless important.
Clearly they’re going to look at cost, and the simpler the Sipp, the more appropriate it is to look at costs. As you move up the investment complexity, cost probably becomes less important. Far more important is the competency of the provider.
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Andy Bell |
bell: It has been a source of frustration to me that the Sipp market has recently started turning on itself. There is a sense that the Sipp providers have circled their wagons, but all guns are pointing inwards.
We should embrace and celebrate the fact that variety is the spice of life. In a market that demands varying degrees of flexibility, there will be many variants of product. Sipp providers shouldn’t feel threatened by each other, nor should they define their strengths in terms of the perceived weaknesses in other products. Choosing a Sipp is a complex process and one where many people need the guidance of an experienced adviser.
We have long held the argument that price is arguably irrelevant in many Sipps where it is the ancillary charges such as those for investment advice and management that will dominate.
We have found online functionality and ease of use is key in the context of the advisers in the very popular mid-market space. Investment flexibility is important to a point, although we found more demand for allowing the likes of ETFs as opposed to unquoted shares.
Floyd: What innovations do you anticipate developing in the market?
bell: It’s not hard to see the progression of online Sipps with integrated dealing into a service that can be accessed and properly utilised via mobile phone technology
As for product functionality, I don’t think Sipps will continue to become ever more flexible. If anything, I think we will see the reverse, as those Sipp providers who have taken on all types of investments start to challenge themselves as to which assets give them a disproportionate administrative headache and which leave them with liabilities that they are uncomfortable with.
