Suffolk life began in pretty unremarkable circumstances. Head of marketing Greg Kingston says: “We have a fairly typical history. We were founded in 1971 by a group of local solicitors who wanted to put their property in to a retirement contract.
“They did the same thing for other local professionals until Sipps were formed in 1989, when they could distribute more widely.”
The company was acquired by Legal & General in 2007. Kingston says: “L&G bought us because they saw several things they valued. The actual business, the brand and the section of the market we operate in. Changes that have occurred have come from us rather than L&G.”
The company has kept a close eye on the Sipp market over recent years and adapted its focus accordingly. Kingston says: “We started at the affluent end because that client segment dominated the market back then. There is more choice now and with that comes downward pressure on costs. Some investors do not need all the flexibility offered to the higher end, so we can offer less flexibility and range at a lower price point. The mid-market is where growth is right now.”
Suffolk Life’s total assets exceed £4bn and the company has sold over 16,000 Sipps. Its most recent offering, the SmartSipp, is a product Kingston believes makes the most of this midmarket growth.
“The SmartSipp was launched in June but I think people are only just starting to get it now. We took the line from the FSA about advisers being likely to have to consider more than one platform to meet their clients’ needs really seriously. Rather than having a product that fits on a platform, we wanted to develop a Sipp that works with as many of them as possible.
“Awareness of the SmartSipp has really ramped up recently and is likely to continue to do so over the next couple of weeks because we are going to announce two more platform partners on it. They are significant heavyweights that you would expect to be on there.”
Apart from building on the SmartSipp, Suffolk Life’s business plan is to continue to track market changes and grow accordingly. Kingston says: “Service levels have not changed but how providers deliver it has. “Increasingly advisers want to shift day-to-day transactions online so they can just do it easily in their back office. The big industry focus over the next few years is going to be online because the pressure is on Sipp providers to deliver the best adviser experience possible.”
However, Kingston says the online arena may not be suitable for all providers. “If you are a smaller firm, you may have to look at other areas. It takes enormous capital investment to build the service IFAs expect, let alone maintain it,” he says.
Smaller providers may opt to go down the consolidation route. “There is going to be more downward pressure on the industry. We have had three years of low interest rates and growth in the niche end of the market has stagnated. It seems inevitable that there will be some consolidation,” says Kingston.
However, bigger providers who invest in technology will gain more of a market share under the impending RDR, according to Kingston.
“Although some advisers may choose to service more high-net-worth clients than they have done in the past, there is a responsibility from IFAs and therefore from us to be able to service clients with smaller pots. It should be done in the most economical way possible and technology is the best way to do that.”
Suffolk Life will continue to service both big and small pots. “We may have entered the mid-range market this year with the SmartSipp but we do not see that as leaving wealthier clients behind. We want to play in all areas of the market and maximise opportunities,” says Kingston.
Kingston believes that the Sipp market is set to grow significantly over the next few years. He says: “Looking at FSA sales data, there has been a decline in personal pensions and a rise in Sipp sales. Within a year Sipps will be outselling personal pensions. Certainly, once the RDR is in place, it might be quite hard to justify recommending a personal pension with commission out of the equation.”
However, Kingston does see some potential obstacles to market growth. “There are regulatory issues without a doubt. The biggest one this year is the outcome of CP 11/03, which has the capacity to change a few things for the smaller providers.
“The paper’s intentions are clear greater clarity for the end consumer on product costs but it sounds like there could be a need for substantial technological investment. This could be burdensome for some providers,” he says.
Kingston thinks this could be compounded by ongoing issues for Sipp providers. He says: “Revenue has been dropping for some firms and we have also had the FSCS levy. Some providers could not absorb these costs and had to pass them on to investors. I think the next step is saying, ’We need significant capital to just stay where we are and keep up with regulation. Are we capable of doing that?’
“We are in a good position in that we are both profitable in our own right and are backed by L&G, one of the strongest companies on the FTSE.
“Over the next five to 10 years, the baby boomers are going to retire and they are going to demand more retirement options with greater flexibility. Suffolk Life has a couple of exciting plans in the pipeline to accommodate this thirst for innovative products.”
1971: Suffolk Life established by a group of solicitors who wanted to buy commercial property using pension funds. It was headed by Alan Catchpole
1989: Sipps first come into existence
1996: Suffolk Life launches its first Sipp, the Suffolk Life Sipp
1997: Henry Catchpole, Alan’s son, takes over as managing director
2006: Suffolk Life sells SSAS business book to Mattioli Woods and changes focus to Sipps
2007: Suffolk Life launches the MasterSipp, which allows more flexibility around protected rights
2008: Legal & General acquires Suffolk Life
2010: Marketing director John “Mr Sipp” Moret retires from the industry after 40 years in pensions. Catchpole steps down as managing director and is succeeded by finance director Ian Furniss
2011: Launch of SmartSipp, a platform-based Sipp aimed at the mid-market.