From Lamborghinis to overseas property, what have we learned from the 2019 Money Management SIPP survey?

The annual Money Management SIPP survey always produces interesting insights into the world of self-invested pensions. The 2019 edition is no exception, providing a fascinating opportunity to see how Pension Freedoms have changed the retirement landscape and the continuing popularity of SIPPs.

So, without further ado, here are the things we’ve learned this year.

The self-invested market is flourishing

The survey reported that 95,860 SIPPs were established from January to December 2018. As not all providers take part in the survey, the actual figure is likely to be significantly higher.

However, the market continues to polarise

Over the years, we’ve seen many new entrants to the SIPP market, some with a bespoke offering, while others are almost indistinguishable from a personal pension.

The survey reported that of the 95,860 SIPPs opened in 2019, 26,587 were at the bespoke end of the scale, while 69,372 were platform based.

Transfers outweigh new contributions

Most of the money (85%) paid into SIPPs results from a transfer in, rather than a new contribution.

Bespoke SIPPs are more popular with wealthier investors

The average value of a bespoke SIPP was nearly 60% higher than that of a platform SIPP; £281,682 compared to £176,488.

Most pensioners aren’t buying Lamborghinis

Speaking in 2014, the then Pensions Minister, Steve Webb said: “If people do get a Lamborghini, and end up on the State Pension, the state is much less concerned about that, and that is their choice.”

Despite the greater access people now have to their pension, the survey shows that only a small proportion of people are taking full fund withdrawals.

But they aren’t buying Annuities either

Once the default option for retirees, the survey gives a fascinating insight into how the retirement market has changed since Pension Freedoms were introduced. The survey reports that a total of three people (yes, just three!) purchased an Annuity over the past year.

Although they do have more options than before

Most providers now offer a full suite of Flexi-Access Drawdown options while retaining Capped Drawdown for those who can still use it.

Comparing SIPP provider charges is still a thankless task!

The survey confirms that the charging structures of many SIPP providers continue to be horrendously complex.

It also illustrates that the only fair way advisers can compare SIPP providers is by taking a specific scenario and calculating both the initial and ongoing charges themselves. Remembering, of course, to factor in any ‘ad-hoc’ charges such as phone calls, emails, valuation requests etc.

Commercial property continues to be popular

While most firms offer commercial property purchase, the survey demonstrates the wide variety of charges that can apply.

That means care should be taken to avoid simply looking at the ‘headline fees’ (annual admin fee, purchase fee) but to consider the additional annual fees some providers charge. For example, for simply holding a property, those charged to group SIPP arrangements or where a SIPP has borrowing.

But, if you want to buy overseas your choice will be limited

Despite HMRC permitting overseas commercial property purchases, most providers shy away from it. In fact, only five admitted to holding any overseas property in their SIPPs.

We can understand why too, the complexities of dealing with different legal systems and the potential for scams make it a tricky proposition. We attempted one overseas purchase in 2006, it turned out to be a hugely difficult case and we’ve learned our lesson!

Higher capital adequacy requirements have reduced choice

The smaller number of firms taking part in the survey demonstrates that the SIPP market continues to contract. Poor decisions have forced some firms to leave the market, while others have merged or been acquired following the changes to capital adequacy requirements.

Advisers and investors still have numerous options. However, it’s clear that despite being a popular choice, with nearly 100,000 SIPPs opened in the past year, the number of providers is contracting.

The picture is incomplete

Many firms chose not to disclose information about commercial property and, more specifically, overseas property.

Our survey response

We were delighted to provide a full and detailed response to Money Management.

In fact, we didn’t pass on answering any of the key questions.

Highlights from our submission included:

• We hold 175% of the capital required by the new rules.
• All of this is held in cash, we do not rely on loans or other complex arrangements to meet our capital adequacy requirements.
• Only 10% of our SIPPs hold ‘non-standard’ with many being commercial property or fixed-term deposit accounts.
• We don’t hold any overseas property, landbanks or hotels in our SIPPs.

We regularly talk about the benefits of our approach, promoting longer-term stability over short-term growth, while providing a simple solution to advisers and investors alike. Our survey submission demonstrates that we back our words with actions.

If you would like to know more about our SIPP, please don’t hesitate to get in touch by calling us on 01438 747 151 or emailing info@ipm-pensions.co.uk