Are some SIPP providers just using SIPPs to push in-house insured funds?

James Hay, the UK’s largest SIPP provider, today warns that certain SIPP providers have particularly high proportion of their assets in insured funds investments. James Hay analysis of the Pensions Management SIPP Survey shows that three major SIPP firms have over 70 per cent of SIPP assets held within in-house insured funds . This suggests that these providers are using SIPP structures to sell in lucrative internally managed funds business, and that these SIPPs are little more than insured personal pensions.

SIPPs, which are aimed at sophisticated and mass affluent investors, offer the greatest degree of investment flexibility and the widest range of permissible investments. James Hay research into its own portfolios found that collective investments were the second most popular asset, after trustee investment plans.

However, the research also shows the broad range of assets typical of an investment portfolio – including cash, fixed income, property, direct investments and trustee investments. This diversity of investment structures and strategies is more akin to the “New Balanced” type funds used by professional pensions investment managers and consultants.

Chris Smeaton, Propositions and E-Commerce Manager, James Hay, said, “Many fund supermarkets and Life Officies are merely replicating their historic fund ranges for use in the SIPP arena. These options can be restrictive and certainly do not make the best use of a SIPP product.

“While these can be appropriate for many investors, purchase costs should be a key factor in determining value for money. Most pensions professionals use a variety of different investment strategies to overcome these issues and ensuring diverse investment coverage.“

“An over-reliance on any single asset type should be monitored closely - and with the high investment management costs eroding future pension funds, this could be a real concern. Pensions investment is complicated, and SIPP investment flexibility allows investors to balance portfolio risk and achieve investment goals.”

“James Hay believes that planning carefully for retirement is paramount. We would urge investors to seek out professional advice on an appropriate investment strategy for their retirement.”