January 2008

Q&A

Following suit

Given the huge growth in SIPP sales post A-Day what are your future growth expectations for the market?

I believe the SIPP market will continue to grow as individuals want to take control of their retirement benefits. The flexibility of a full SIPP enabling people to make choices and change their strategies will only be in greater demand as people start to understand the power of using a flexible and open-plan framework. My estimation of SIPPs growth over the next five years for individual arrangements will be approximately 30% year on year. However, in the group SIPP arena, I think the opportunities for this are even greater and we may see growth of 100%-150% each year for the next five years.

Poor transfer times have been highlighted as a real issue for SIPP providers. How do you feel this issue is being addressed?

I don't think that transfer times are a major issue; however, there are certain companies who do take a long time to get schemes or assets transferred. As the majority of providers charge for transfers out, there should be one service standards timescale. If these service standards are not met then a reduction in the transfer out fee should be considered. As an issue, it is not really being addressed unless companies make them a higher priority. However, as SIPPs are now regulated and the principles of TCF need to be considered SIPP providers need to ensure customers are not disadvantaged in any way.

What lessons have you learned from the SIPP regulation process?

I genuinely believe that for most long standing SIPP companies it did not have a great deal of impact as the majority have always operated in a controlled manner. It has enabled providers to review their documentation to ensure the principles of regulation are adhered to and that information is concise and appropriate to the targeted readers.

However, it is clear that there appears to be a lack of understanding within the FSA in respect of the various products labelled under the SIPP "banner". There needs to be more understanding of the different propositions in the marketplace and the different status of each of the product providers.

How much demand do you think there is for the use of protected rights in a SIPP?

There appears to be great demand from the IFA community in respect of protected rights. They believe there are significant amounts that should be properly invested and they want to consolidate their clients' position under an open plan flexible SIPP product. During 2007, there have been a couple of new entrants into the marketplace that are currently allowing protected rights to be self invested through structuring their products to circumvent current regulations. We, for one, are about to receive DWP approval for allowing protected rights into a protected rights SIPP, but until the regulations are changed, there will be restricted investment opportunities for this money.

Will regulation stunt innovation in this market?

I believe regulation actually encourages innovation in the marketplace as each of the players strive to differentiate their products and services. The danger of innovation is that the industry changes a simple open plan architecture product into a series of complex, technical instruments for specific narrower segments of the marketplace. The biggest innovation in the SIPP market at this time is the way in which the open plan SIPP framework can be utilised within the company pension scheme proposition.

What safeguards do advisers need to put in place to ensure that SIPPs are only sold to those who need them?

I'm not sure that further safeguards should be required as this, in itself, suggests that advisers are not acting responsibly. The standards should be no different ensuring that the clients get a product and service that is appropriate to their requirements. Advisers can only understand the requirements by understanding the client's aims in terms of their retirement plans. Advisers will match the requirements of their client to the product offered by the product provider, and this should not be influenced by commissions or introductory fees.

Given the huge growth in the deferred SIPP market how will the role of the niche provider evolve over time?

The role of the niche SIPP provider strengthens further as more high volume simple SIPPs are brought to market. There will continue to be many individuals who require a much more flexible approach to maximise their retirement plans. This level of control cannot be provided, or indeed serviced, by high volume players who can only satisfy the market in terms of money invested in their own funds. A SIPP open plan framework is one that is used on an on-going basis and advisers work closely with their clients to ensure they are utilising "the best of breed" in terms of assets and asset managers and, indeed, can, with relative ease, move in and out of the different asset classes at appropriate times. Administering some of the more complex asset classes requires intelligent administration from individuals who are technically competent and well trained who understand the issues. This level of resource, cannot be economically recruited or utilised in the high volume business, that is why the hybrid players have to maintain restrictions on their products and the role of the niche provider grows stronger.

How will the Retail Distribution Review (RDR) affect the SIPP market?

The RDR will affect all markets. It should have a positive effect in relation to the SIPP market as those advisers who are categorised "independent" have to become even more independent visibly and prove their independence through the use of different providers for different needs. The worry regarding the RDR is that many advisers are not taking it particularly seriously and do not really understand the implications of it. The risk is that this delivers confusion into the marketplace. However, this again, creates an opportunity for the niche providers who would genuinely provide more information and technical support for advisers to enable them to advise their clients more efficiently.

ABOUT THE AUTHOR

Christine Hallett is chief executive at Pointon York SIPP Solutions

Christine has been with Pointon York SIPP Solutions for more than 10 years, where she has been instrumental in the growth of the SIPP business and is passionate about the delivery of excellent customer service. Christine is well-known within the financial services industry, having built an impressive reputation for her knowledge and expertise in the SIPP arena.

ABOUT POINTON YORK

Pointon York has been established since 1970. In the last few years, it has built an enviable reputation as a specialist provider of SIPP services. In fact, it is one of the few independent SIPP providers in the UK to focus only on SIPPs.

Christine Hallett
Chief Executive
Pointon York SIPP Solutions