Suffolk Life Sipp draws route for protected rights

This is the first time the company has allowed protected rights money to be self-invested in the same scheme as ordinary pension benefits. It will do this within the legal and regulatory requirements.

Protected rights refer to national insurance rebates that are built up and paid to people who are contracted out of the state second pension. Under the current rules, protected rights money is allowed in insurance-based Sipps but it cannot be invested in a trust-based Sipp. This Sipp works within the rules by making use of the two arms within the Suffolk Life Group. Suffolk Life

Pensions operates and administers the Sipp for ordinary pension benefits, while protected rights money goes into a self-invested fund under a trustee investment plan with Suffolk Life Annuities, an authorized insurance company. Investments in UK commercial property are also made through the trustee investment plan.

Suffolk Life says the protected rights market is estimated at around £100 bn, with the bulk of these funds currently invested in insurance company funds. Research conducted by the company shows that up to 50 per cent of new Sipp business has attaching protected rights and external research shows that 60 per cent of advisers claim they would use self-invested protected rights for at least half of their clients if it were more widely available.

Non-protected rights can be invested in a very wide range of assets including: listed shares, bonds and funds, UK funds, offshore funds, exchange traded funds and exchange-traded commodities, hedge funds and commercial property. For protected rights, legislation is more restrictive so the choice of assets is limited – for example, investment in exchange traded commodities and warrants is not allowed.

Advisers may welcome Suffolk Life’s ability to create a product within the current rules allowing self-investment of protected rights alongside ordinary pension benefits. However, the product may face competition from insurance-based Sipps that can accept protected rights money, such as the Merchant Investors Sipp.