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This week in Pensions

At a recent Money Marketing round table, panelists marvelled at the rapid growth in Sipp business over the last year to become the £9bn a year phenomenon it is today.

One panellist, Hargreaves Lansdown head of pensions research Tom McPhail argued Sipp sales have gone ‘ballistic’ and the latest figures from the ABI would appear to back this up.

ABI members alone took £2.5bn in the first half of 2006 and are forecast to take £5.5bn by year end. Single premium pensions Sipp business was up 115 per cent in the first half of 2006 compared to the same period last year, while Sipp drawdown shot up by 44 per cent.

Success stories abound with the industry left to look on in wonder at the recent revelation that AJ Bell is taking £120m per month.

But Norwich Union has sounded a cautionary note this week – which will inevitably sound like sour grapes to some – arguing the Sipp market represents ‘low hanging fruit’ for the FSA.

NU head of pensions Iain Oliver argues the explosion in Sipp sales is not backed up by any significant changes to Sipps over the past year. The Government infamously put the brakes on residential property in Sipps – removing one of the key factors that was getting people excited about investing in the wrapper.

He says he has sympathy with advisers pressurised by clients baying for Sipps, fuelled by media hype.

But he argues that some firms are also focussing exclusively on Sipps and putting clients better suited to personal pensions and stakeholder products into higher charging Sipps.

He says these inappropriate sales will represent an obvious target for the FSA, which has already warned firms to make sure they can justify putting customers into Sipps.

Predictably, these comments have caused something of a stir in certain corners of the market.

Standard Life head of pensions John Lawson says the widely held notion that Sipps are automatically more expensive than PPs, or stakeholders is ridiculous. He points out the Standard Life Sipp starts at 1 per cent, compared to 1.5 per cent for a stakeholder, which also has fewer funds. He argues that the Sipp has the flexibility to be a personal pension or a stakeholder, but customers can activate the full benefits of a Sipp if they choose. Customers should always be advised to go into a Sipp if it is the same price or cheaper than a stakeholder or PP.

He adds: ‘If NU wants to sit on the sidelines then it¹s their loss.’

But Scottish Life head of communications Alasdair Buchanan believes Oliver is not driven by jealousy at rivals¹ burgeoning Sipp sales. He too points out that the FSA has already issued a thinly veiled threat on the issue and will be naturally suspicious of the explosion in sales of a product which has, essentially, changed little over the past year.

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