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Sipp building

The media frenzy over changes to Sipps should not be allowed to distort investment fundamentals, says Philip ScottSipp building

The future of Sipps is one of the hottest financial services topics.

The changes for A-Day next year which will mean that Sipps will be able to hold residential property and aletrnative investments has got people talking about pensions.

There has been praise for the flexibility but there has also been heated discussion over how property can be held as an asset and whether collectable postage stamps, racehorses and cars will help grow a pension pot.

Sipp regulation now appears to be a case of not if but when.

Capita SIP Services managing director Graham Coxell says: “Regulation appears to be a sensible move by the Treasury to extend the type of organisation that can establish a pension.

“This should open up the market for organisations such as investment managers to establish their own Sipps. The role of administrator after A-Day is pivotal and administration being carried out by a regulated company should give reassurance to consumers, intermediaries, HM Revenue and Customs and any outsource arrangements.”

Skandia pension marketing manager Billy Mackay believes that one of the key issues when looking at any pension is having a degree of informed choice or preference. He adds: “I think it would be fair to say that Sipps are becoming more mainstream. More people understand them, more people have heard of Sipps than perhaps two years ago. More advisers are using them than ever before.”

Charles Stanley Ssas and Sipp technical manager and chairman of the Sipp Provider Group Barry Bolland admits the SPG has found itself siding with the Treasury in saying it will try to dampen down over-zealous media coverage on Sipps in such areas as property. Bolland hopes sense will prevail by the time we get to A-Day.

He says: “The press has taken certain aspects of the new regime in residential property and blown it out of all proportion. I can imagine it will be quite a driver for lots of people but when they find out all the detail about how you get that investment in your scheme and what the tax implications might be and how it is used, they will change their minds. It will not be for everyone.”

After preliminary talks with the FSA, Bolland expects the regulator’s proposals to be very much involved in the advisory side – “that is what I think will be the thrust of it”, he says. However, he adds that the Treasury and FSA still have to get their thoughts together in terms of exactly what Sipps are all about.

Winterthur pensions strategy manager Mike Morrison explains that while everyone is talking about Sipps there is a danger of “selling the sizzle rather than the steak”.

He says: “Ultimately, your pension is there to provide you with a retirement in your old age so I like the idea of people being free to choose but I think we have to be careful that we do not let ourselves get carried away with the freedom to invest in all sorts of esoteric assets.

Pointon York Sipp Solutions managing director Christine Hallett believes property will feature highly and says: “All these assets are allowed but this is still a pension scheme and should not be classed as a buy-to-let pension scheme/overseas abroad pension. It is a pension and should take into account proper investment strategies with asset allocations appropriate for a particular client. The fundamental principles should not be thrown out of the window because all of a sudden we have a free for all because the investments allowed in are so wide and diverse.”

He believes that the potential new asset classes could turn out to be a red herring and there will not be as much emphasis placed on them as some have assumed but he feels the market will benefit from the interest shown and the Sipp market will continue to show growth.

But another aspect to consider is what will become of the individual personal pension. It is unlikely to disappear but Coxell notes that as Sipps grow in popularity they will encroach on the space previously occupied by personal pensions.

He says: “If you were to include deferred Sipps, which start off investing in traditional personal pension investments on equivalent charges but can be extended to allow wider investment, then individual pensions appear to have little to offer.”

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