The Sipp market is becoming oversaturated and the majority of people taking out Sipps would be better suited to personal pension policies, according to outgoing Selestia marketing director Bill Vasilieff.
He says PPs are better sui-ted to the majority of Sipp investors and those that have open architecture are not saddled with the additional charges that Sipps impose for a wider fund choice.
He says IFAs will protect themselves against future accusations of misselling by insisting that the potential for flexibility was worth paying for if clients want to hold direct equities or bonds.
But Vasilieff believes less than 10 per cent of Sipp users take up this option.
He says: “There is a lot of money being pumped into Sipps but the majority of clients would be better off in a personal pension without incurring the extra charges that everyone applies.”
Clients that want a broader fund choice are generally the best suited for a Sipp but Vasilieff says the advent of open architecture on PPs means this is not really necessary.
He adds that the fact that protected rights are excluded from Sipps is another downside to the product.
Vasilieff says: “It just does not make sense. Before open architecture platforms, Sipps were the only way to access full open architecture. All these entrants to the Sipp market have really not thought it through. The vast majority of clients will be often better off with a personal pension charged through a platform.”
Standard Life head of pensions policy John Lawson says: “I think that, for many a stakeholder, personal pension and a Sipp, the charges are not that much different. It should not actually be about the charges but the service. The service and flexibility are key.”