The Sipp has experienced extraordinary growth during its first 30 years. In his article below, James Jones-Tinsley, self-invested pensions technical specialist at Barnett Waddingham, looks forward to its continuing evolution over the next 30 years and suggests that, particularly with the harnessing of technology by Sipp providers, the best is yet to come.
Just like the Sipp, Barnett Waddingham is celebrating its 30th anniversary this year. Our growth as an organisation during the past 30 years is comparable to the exponential growth that Sipps have enjoyed over that time, evolving from a niche pension product that was the sole preserve of the wealthy, to a mainstream savings arrangement for the many (and increasingly used in conjunction with an investment-based platform).
Those 30 years have also witnessed a change in the regulatory status of Sipps, which became a regulated product in 2007 under the auspices of the FSA, the forerunner of today’s FCA.
In addition, Sipps have emerged as the favoured
wrapper for both standard and non-standard pension investments, from the introduction of pension simplification in 2006 to the dawn of the pension
freedoms in 2015, and beyond.
Barnett Waddingham has additional reasons to celebrate this year, where Sipps are concerned. As well as commemorating 20 years of participation within the bespoke Sipp marketplace, our Sipp subsidiary company BW Sipp LLP now administers more than 20,000, as well as having its AKG financial strength rating of B (or strong) renewed for the third year running.
Of course, any long-term review of Sipps cannot ignore the acres of newsprint devoted to consumers investing their pension savings into esoteric investments through a Sipp wrapper, and often via unregulated introducers.
Many of these investments – including bio-fuels, store pods and overseas plantations – subsequently failed, and the resulting fallout has led to Financial Services Compensation Scheme payouts, court cases, and a number of Sipp providers either going into liquidation or being acquired by other providers.
Despite the potential for reputational damage, however, the Sipp industry remains strong, buoyant and focused on delivering optimum solutions and outcomes for its members, going forward.
Financial advisers that use Sipps as part of their retirement planning advice for clients can now engage directly with their favoured providers to ensure that their due diligence checks are both addressed and satisfied.
Similarly, the introduction of the capital adequacy rules for Sipps in 2016 ensures a level of transparency regarding a provider’s financial strength and types of investments held, which was previously nigh on impossible to obtain.
Looking to the future
So what do the next 30 years hold for Sipps? Arguably, this can be summed up in one word: digital. A new generation of savers, who build their lives around their smartphones, demand a pension proposition that delivers what they want, when they want and how they want it.
Those who are 21 this year will be in their 50s in 30 years’ time, and as they accrue their pension fund over that period, they may move from a digitally enabled workplace pension scheme to a Sipp and expect the technology to be equally seamless.
The extent of innovation now taking place within the financial services industry is undeniably breathtaking, with app-based tools increasingly replacing outmoded application processes, as well as the need to send
valuable items like passports and certificates through
the post in order to satisfy anti-money laundering procedures.
But just as with the change from using fax machines in 1989 to secure email encryption in 2019, the technological evolution will be a gradual journey, rather than an overnight metamorphosis.
The digital revolution, with its increasingly sophisticated user recognition tools and investment-
based algorithms, will undoubtedly make life easier for both advisers and their clients, while offering a perfect fit for the 21st century Sipp providers and their online propositions.
The first 30 years of the Sipp experienced both high and low points, but the providers that remain are those that are committed to achieving positive adviser and customer outcomes, underpinned by sound financial foundations, and clean books of business. We are ready for the next 30 years of the Sipp – bring it on!