Pension freedoms drive ‘record-breaking’ platform flows in Q1

Victoria McKeever writes

Platforms experienced a ‘record-breaking’ first quarter after seeing the highest quarterly sales on record, with assets under management (AUA) reaching £520bn, Fundscape has found.

According to the firm’s latest platform report platforms achieved net sales of £13.3bn in the first quarter of the year, representing a 27% increase on Q4 2016 and a 39% increase on Q1 2016.

The report said, with a couple of exceptions, every platform experienced higher net sales in the period.

The driver behind the inflows were the government’s pension freedom reforms in 2015 and the resulting pension transfers, Fundscape said.

Self-invested personal pensions (SIPPs) and personal pensions accounted for the largest share of assets and sales in Q1, with £158.3bn (30.5%) of AUA and £8.5bn (63.4%) of net sales .

Defined contribution (DC) pensions accounted for 10.3% of AUA at £53.5bn, and £0.7bn of net sales (5.2%).

Meanwhile, ISAs accounted for £141bn of AUA, which the report said was one of the strongest quarters for ISA business on record, despite most business typically taking place in the second quarter of the year.

The positive performance followed the sector’s recovery in Q4 2016, after a difficult first three quarters of the year due to economic factors and Brexit fears prompting investors to stay away from investments, the firm said.

Fundscape chief executive Bella Caridade-Ferreira (pictured) said: “After three difficult quarters, investor sentiment began to improve in Q4 2016, and gathered momentum in Q1 2017.

“Pension business was the real driver of platform flows – fuelled by demand for defined benefit transfers and access to pension freedom, net pension sales were up 27% on the previous quarter and 44% on like-for-like sales in 2016.”

Caridade-Ferreira expected pension business to remain the key driver throughout the rest of 2017 and that the sector would continue on a steady course, despite likely political headwinds.

She said: “Accessing pension freedom through DB transfers is a top priority for investors nearing retirement, and this will keep the industry buoyant throughout 2017 and well into 2018.”

The report found there to be no change in the top five platforms by AUA, which account for roughly two-thirds of industry assets. Cofunds and Fidelity led the asset rankings, with £86.8bn and £75.6bn respectively.

Meanwhile the top three platforms by percentage asset growth – Aviva, Aegon and AJ Bell – all recorded a double digit boost, which Fundscape attributed partly to their pension credentials. Aviva’s assets grew by almost 14%, Aegon’s by about 13%, and AJ Bell saw 11% asset growth.

Engaging with advisers

AJ Bell launched a platform due diligence content hub for advisers, to help with the selection process, in response to regulatory concern around the quality of adviser processes.

Caridade-Ferreira agreed that it was important for advisers to focus on due diligence but said providers were increasingly offering advisers more support.

She said: “Old Mutual have started offering masterclasses for advisers on due diligence so I think any platform that is proactively engaging them on the subject will help sector growth.”