The number of people taking out SIPPs is due to increase exponentially in the coming years, Peter Robinson, director of Intelligent Partnership has said, when interviewed for this article published in FT Adviser.
According to Mr Robinson, there are 800,000 SIPP subscribers in the UK, and that figure is set to grow 15 per cent each year. He said this was down to rising numbers of investors waking up to the fact they will not be able to rely on the state for a decent retirement income. However, instead of buying a traditional personal pension scheme, Mr Robinson said many people now want to take control of their finances and pick and choose what goes into their pension pots through a SIPP.
Increasingly, he said people are also choosing alternative investments for their SIPPs, such as timber and farmland. He said: “People are investing more in alternative assets, such as trees, gold and green oil. With the global financial shocks of the last few years investors have looked for alternatives to the mainstream products that have, broadly, performed badly.”
Alternative investment products now number 250 to 300, up from around five just four years ago and are used by investors to diversify away from conventional products that are tightly correlated to the stock market. Mr Robinson said IFAs should look to strike a balanced portfolio for their clients, with alternatives accounting for 10 per cent to 20 per cent of the portfolio.
He said: “Alternatives tend to be focused on more tangible assets and physical products people like and understand as investors. Take farmland for instance. People are thinking in macro terms. They know the global population is increasing and the cost of food is going up, so they see an opportunity in investing in mature and fertile farmland that gets two harvests a year sold to a booming market. Stocks and shares can yo-yo, so these types of investments offer stability to an investment portfolio. When this is presented by an IFA, people get it because it’s simple and reassuring and it’s not a clever product created by bankers who don’t even understand it themselves.”
The drawback of alternative investments is they are not covered by the Financial Services Compensation Scheme or regulated by the FSA.
Mr Robinson also cautioned IFAs not to oversell or overexpose clients to alternative investments, as some come with “handsome sales commission” that brokers can get “carried away with”.
Blair Cann, senior partner for Hertfordshire-based M Thurlow & Co, said: “We don’t use alternative investments, often because most of our clients are extremely conservative and you need to be reasonably adventurous to use the AI facilities to the full.”
Original Article : FT Adviser