Not all SIPPs are truly open, says Fidelity

Analysis of Defaqto data by Fidelity FundsNetwork, UK SIPP provider, has revealed that despite the post A-Day open-architecture environment, not all Self Invested Personal Pensions (‘SIPPs’) are truly open.

The analysis shows that while there is a growing trend towards flexibility and choice for pensions, some SIPPs still require a minimum investment into insured funds. Of the 72 SIPP providers listed on Defaqto, FundsNetwork found that at least 1 in 8 (14%) have a contract which requires a minimum investment into the company insurance scheme.

SIPP investors with providers such as Axa, L& G, Friends Provident or Zurich can expect a minimum proportion of their SIPP investment to go into insured funds. This can be wide ranging – anything from £1,000 for some providers to £75,000 for others.

Anecdotal evidence shows that the average case size advisers are seeing for new money into SIPPs is £138,000. On this basis, investors opting for the provider with the highest minimum (£75,000) will see more than half (54%) of their money go into insured funds.

David Dalton-Brown, Head of Fidelity FundsNetwork said: “In our post A-Day landscape of flexibility and open-architecture, it is surprising to see that so may providers still continue to put minimum fund requirements in place. Investors should be free to choose where they invest their SIPP and take advantage of the benefits that a truly open SIPP can offer.”

A small survey conducted by FundsNetwork recently, showed that many advisers (91%) feel that requiring a minimum amount of the SIPP to be invested in insured funds, or limiting the investment choice available is not beneficial for clients.

Nearly half of those questioned (46%) believe that clients should be given the greatest choice of mutual funds possible for their SIPP, while a further 42% think restrictions are unhelpful, while a small proportion – 3% believe it actually makes the investment decision harder. Just 7% of those questioned feel that the restrictions help in some way.