Given that A-Day is more than a year away, I am impressed by the number of column inches devoted to the proposed changes. The ability to include residential property in self-invested personal pensions is exciting but perhaps the most interesting element is the way in which a roadmap is being established for how pensions might look a few years hence. With personal accountability for retirement savings appearing unavoidable, Sipps look set to grow significantly.Given that it was Nigel Lawson who effectively introduced Sipps, it is ironic he should feature so prominently in the news last week. The release of documents relating to the exit of Britain from the Exchange Rate Mechanism highlighted the disagreements between Chancellor Lawson and Prime Minister Margaret Thatcher. With all the shenanigans presently taking place between Numbers 10 and 11 Downing Street, it only goes to show how little changes over time. But returning to the Sipp market, when originally introduced, they looked like the retirement product for sophisticated investors. As the attractions of income drawdown were trumpeted, I well recall concerns that this could be the next big misselling scandal. After all, if investors were capable of demanding unrealistic returns from their portfolios, why should they not do just the same with their pension fund?As it happens, this market has become better understood and the controls more appropriate for the purpose served by Sipps. From being a cottage industry in the shadow of the more heavily monitored institutional sector, investment process and risk profiling have become commonplace. Investors can have the reassurance that many firms offering investment management services now define their offering much more clearly and give a better idea of what returns to expect over time. I have long been a fan of Sipps and put my money where my mouth is. Mine has been around for a number of years so I enjoyed the bull market conditions of the late 1990s as well as suffering from the setback half a decade ago. What is interesting is how the marketplace has changed. There were not too many providers around when I started out but today the choice is considerable. The cost has come down, too. Pensions are an area where advisers can truly flourish. We are all being exhorted to save for retirement. If you are not yet in the Sipp market, it is time you got wise to the area likely to offer the biggest growth in advice in the years ahead. Of course, while advisers can deal with the contribution and benefit strategy, it is the investment manager that must come up with an appropriate portfolio of assets. The reality is that Sipps demand a different approach from other portfolios. At the launch of a multi-manager service, I recall the provider arguing that theirs was the perfect means of investing pension money. I begged to differ. If anything needs a lifestyle approach, with the asset mix and approach to risk varying over time, it is a Sipp. There are a number of definable moments in the life of Sipps which require a variation in the approach. Creating a tax-free cash pool or preparing for income drawdown are just two. Model portfolios will only work if they are dynamic in the context of the lifecycle of the pension. So if you are not on board the Sipp bandwagon yet, get wise. It could prove to be the most important part of your business a few years hence.
In an exclusive interview with Money Marketing, Kenmir, managing director of regulatory services business unit and sector leader for retail intermediaries, says he could understand why IFAs are unhappy with the FSCS and the FOS. He admits that tough times are ahead for intermediaries as they face up to depolarisation with business costs rising, investment […]
UK house price inflation rate fell from 13.7 per cent in November to 10.7 per cent in December despite Northern Ireland seeing a rise from 13.5 per cent to 16 per cent, according to the office for the Deputy Prime Minister. The highest rates remain in the North East (20.5 per cent), Yorkshire and the […]
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