Advisers should look closely at the rate of interest paid on Sipp and SSAS accounts, warns Investec Private Bank.
Research from the firm reveals 37 per cent of pension advisers do not know what rate of interest is being paid on Sipp and SSAS accounts, meaning the cash element of the products could be languishing in a low-interest savings account.
A survey conducted in August by Defaqto shows that 90 per cent of Sipp accounts pay less than 4 per cent and 16 per cent pay less than 3 per cent, with only 9.7 per cent offering more than 4 per cent interest.
Over a quarter of advisers believe that A-Day has been a hindrance to consumers, with many saying the new rules have complicated pensions. Demand for Sipps has risen, with 39 per cent of advisers seeing increased interest from clients. Advisers say clients are turning to Sipps because of the greater choice, range of investments and flexibility.
But surprisingly, half of advisers believe Sipps will not continue to play an important role in the future of retirement planning.
Investec estimates there could be as much as £5bn of cash held in Sipps, representing a quarter of Sipp funds.
Head of banking and treasury Linda McBain says: “It is encouraging that consumers are still turning to Sipps as part of their retirement planning but these results show that there is still some way to go in terms of reducing the level of complexity faced by clients looking to set up a pension and volume administration faced by advisers.
“For instance, there are numerous best buy tables and websites promoting cash rates provided on Sipps. Consumers need better information on the cash rates provided on Sipps to get the best possible returns for their pension.”