Do you really need your SIPP?


Thousands of investors could be paying over the odds for a pension product they do not need, research reveals this week.

Pension provider Skandia fears that self-invested personal pension (SIPP) plans may have been mis-sold to investors who are more suited to conventional personal pension plans at a much lower cost.

The research from Skandia found that one in four people who invest in a SIPP have the vast majority (90% or more) of their assets held in either a Unit Trust or open-ended investment company (OEIC). A wide range of both these types of funds is available more cheaply through regular personal pension plans - prompting concern that many investors are not utilising the product they are paying for.

Nick Dixon, marketing director at Skandia said: "Since the introduction of SIPPs their popularity has grown significantly and are sometimes positioned as the only pension worth having. This is not in the best interests of the majority of people and there is a danger that many SIPP customers are in the wrong product."

SIPPs generally command higher charges as they give increased flexibility to investors through a wider choice of investments.Yet the survey revealed that 70% of investors who have a SIPP do not use it to invest in exchange traded funds (ETFs), 60% do not use it to invest in investment trusts, and nearly half (45%) do not use it to invest in direct equities.

"Whilst a SIPP can offer a wide investment choice and flexibility, our research suggests that many investors aren't fully utilising the investment flexibility that SIPPs offer and would instead be better off with a platform pension," adds Dixon.

The pension provider highlights further supporting evidence that suggests SIPPs remain a niche investment vehicle, with research showing nearly half (46%) of advisers believe that just one in ten or less of their customers would be better off with a SIPP than a personal pension.

"As platform pensions continue to evolve - with the range of assets available and income flexibility increasing - we would expect platform pensions to increasingly replace the need for SIPPs," adds Dixon.

SIPP providers have hit back claiming that while the accusation may be true of early version SIPPs with high charges, more recent lower cost additions to the market actually offer better choice and value for money than personal pension plans.
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