It is now 25 years since the UK was introduced to the self-invested personal pension (Sipp) by the former chancellor of the exchequer, Nigel Lawson. In his 1989 Budget speech, he said: “I propose to make it easier for people in personal pension schemes to manage their own investments.” And thus, the Sipp was born.
Now 25 years later, the Sipp industry is booming, with a consistent increase in plans over the years. But with age comes responsibility - namely regulation.
Sipp providers have been waiting patiently for the FCA to release its proposals for capital adequacy requirements, with many believing it will now be pushed back further to the second quarter of 2014. The much-anticipated paper was originally due to be published in September 2013, and is meant to set out exactly how the regulator is planning to increase the amount of money Sipp firms will be required to hold in reserve. The initial publication was released in November 2012, proposing that the fixed minimum capital requirement each operator should hold rise from £5,000 to £20,000.
Regardless of any changes that may happen, Sipp business is showing no signs of slowing down. A quick glance at the Tables ahead shows that, in the past 12 months alone, more than 115,000 Sipps have been set up - Hargreaves Lansdown contributing more than 34,000 new plans alone. The number of Sipps lost has stayed more or less the same, but it is unclear why. The majority of providers claim is it due to retirement and death, but in a few cases, service issues have been cited.
One key factor of this survey is that it is now one full year after RDR, so we can now see if the regulation has had any impact.
Martin Tilley, director of technical services at Dentons, says, “ Working in the medium to top end of the Sipp market and with a transparent fee structure, the vast majority of our introducing intermediaries were working on RDR-appropriate business models well before the RDR was introduced, so we have seen minimal new business changes.”
Head of technical support at Talbot and Muir, Claire Trott, agrees that for the true bespoke Sipp providers who have not paid commission to advisers, the RDR was not a big deal. “It was mainly just a case of updating forms and ensuring that the agreements are clearly in place for ongoing adviser charging payments,” she says.
“Those payments made from the underlying investments may however have ceased and advisers are taking more from the Sipp bank accounts to compensate for the work they are still doing for the client.
“It is a cleaner way for the client to see the charges if it is all taken from one place, which is really the point of adviser charging.”
But despite regulatory changes, the Sipp industry continues to grow. This survey covers 56 providers and a total of 74 plans, up from the 53 providers and 74 plans in October’s survey. Notable absentees are Aegon and Friends Life; Aegon cited time and resource issues in being unable to complete the survey, while Friends Life said it no longer feels the survey is appropriate to complete.
