SIPP investors who have the vast majority of their assets held in Unit Trusts or OEICs may be better off using a platform pension due to cost, says Skandia.
According to the group’s recent Adviser Barometer, one in four people who invest in a SIPP have 90% or more of their assets held in either a Unit Trust or OEIC. With the charging structure of a SIPP generally more expensive than a platform pension, Skandia questions whether SIPP is suitable for investors who do not engage with a wide range of investments.
Nick Dixon, marketing director at Skandia said: “There is a danger that many SIPP customers are in the wrong product.”
In addition, half (46%) of advisers believe that just one in ten or less of their customers would be better off with a SIPP than a personal pension.
The survey also revealed that 70% of investors who have a SIPP do not use it to invest in ETFs, 60% do not invest in investment trusts, and 45% do not use it to invest in direct equities. Skandia believes this indicates SIPPs are more suitable for those with bespoke investment needs.
Dixon added: “Since the introduction of SIPPs their popularity has grown significantly and are sometimes positioned as the only pension worth having. This is not in the best interests of the majority of people and there is a danger that many SIPP customers are in the wrong product. While a SIPP can offer a wide investment choice and flexibility, our research suggests that many investors aren’t fully utilising the investment flexibility that SIPPs offer and would instead be better off with a platform pension.
“As platform pensions continue to evolve – with the range of assets available and income flexibility increasing – we would expect platform pensions to increasingly replace the need for SIPPs.”
Intelligent Partnership Comment
The above article refers to Skandia who had conducted a survey where they felt that many investors were in SIPPs when they could be using a fund platform instead. Incidentally, Skandia were the first company in the UK to launch a fund platform.
The article goes on to mention that a number of SIPP investors invest in funds via their SIPP which could be invested via a stakeholder plan. Compared to all SIPPs advised via TailorMade SIPP Limited, over 95% of clients have invested into alternative investments in order to generate greater growth / income. These alternative investments ARE available via SIPPs, but not via stakeholder plans.