To mark the 30th anniversary of the introduction of the self-invested personal pension (SIPP) on 14 March 1989, we asked five experts how they see the next three decades panning out for the product and its providers
Claire Trott, chair, Association of Member Directed Pension Schemes (AMPS)
“With the changes that have occurred in only the last few years we probably need a crystal ball to predict even the changes that will come about through legislation this year. In the broader sense of the SIPP world, however, I believe we will continue to see SIPPs grow and morph as the retirement market changes.
“They are the most adaptive and flexible pension product available – from simple SIPPs to bespoke SIPPs, they cater for many needs. The changes in 2015 saw the true introduction of intergenerational pension planning and SIPPs were at the forefront of this, making all options available as soon as possible. This quick-change attitude has been key to their survival and I believe it will that they will be an option for many years to come.”
“More consolidation and a potential polarisation”
“When you consider the major changes the SIPP sector has been through over the last 30 years, it is possible to think the sector may not be around in another 30, but that would be far from the truth. With more consolidation and a potential polarisation of the market though, it is unlikely the SIPP sector will look the same. We could see the platform SIPPs at one end and the true bespoke SIPPs at the other.
“At one point in the last 30 years we had more than 120 SIPP providers in the market – now we must have half that number in operation. My fear with further consolidation and fewer SIPP providers is that it will stifle innovation and inhibit the freedoms envisaged by the Chancellor back in 1989.”
“We might see re-introduction of ‘permitted investments list’”
“It is hard to believe 30 years have now elapsed since the SIPP concept was born. It is fair to say the SIPP market has grown spectacularly over those 30 years – helped in no small measure by the concept of income drawdown from 1995 onwards.
“So, what for the next 30 years? Of course, no-one can predict the future with any certainty, but we might see:
* Further, tighter, regulation of SIPP providers;
* Shrinking of the current crowded market to a handful of well-structured and capitalised providers;
* Flattening-out of consumer demand as the ‘boomer’ generation market matures;
* Re-introduction of a ‘permitted investments list’ by the regulator;
* Innovation around retirement drawdown and income solutions;
* Innovation around investment structures, some of which may require a flexible product wrapper to accommodate them;
* Increasing numbers of commercial properties held within SIPPs for cascaded benefits; and
* Widespread use of technology to access data and trade within SIPPs.
“Legal challenges akin to sword of Damocles”
“If there is one defining characteristic of SIPPs over the past 30 years, it is their flexibility. Initially flexibility of investment choice and flexibility of drawing pension benefits, history has also shown the consequences when that flexibility is abused. That is largely in the past now – and that vital ingredient is what is likely to keep the SIPP relevant as a product for the next 30 years.
“I say SIPPs as a product will survive and remain relevant for the next 30 years, as the future for the smaller, focused SIPP operator is less certain. There are legal challenges hanging over parts of the sector that are akin to the sword of Damocles and, for others, their market opportunity has been extinguished by a combination of centralised investment platforms driving most advised business to platforms and the regulator clamping down on the non-standard asset market.
“I am confident the SIPP market will continue to grow”
Nigel Lawson’s Budget on 14 March 1989 changed my life. At the time I was working for a life company called Provident Life that became Winterthur and, ultimately, Axa.
At the time we were exploring ideas to develop a ‘private fund’ option that would have allowed investors some control over their personal pension investments. The budget changed everything – and, following the publication of Joint Office Memorandum 101 in October, we pressed ahead and launched one of the first SIPPs in March 1990. The rest as they say is history – and I have been involved in various capacities in the SIPP market ever since.
I was the inaugural chair of the SIPP Provider Group, which eventually became AMPS. At the first meeting, there were just five original members – and I do not believe any are still in existence. It was a tough struggle for many years convincing advisers and their clients of the merits of SIPPs. Even after 10 years there were only 50,000 SIPPs. Today there are around 2 million with total assets of £300bn.
Pensions simplification in 2006, the growing use of income drawdown, the emergence and growth of investment platforms and the pension freedom changes have been the major drivers of growth – which, year on year, remains at an impressive 15% per annum.
And what of the future? Well, I have a 100% success record with my predictions on the growth of the SIPP market. Despite the scams and scandals and regulatory pressures I am confident the SIPP market will continue to grow.
With individual transfers from defined benefit schemes estimated to total £60bn in the next three years and, with more than £600bn of funds still uncrystallised in personal and contract-based workplace pensions, according to FCA estimates, I confidently predict the SIPP market will exceed three million investors and £500bn of assets – ignoring market movements – by 2025. The outcome of several court cases may determine just how many providers there are to share in the continuing success.”