In a recent article for Financial Adviser, Mattioli Woods wealth management consultant Thornton Wells does his best to crystal ball gaze into the future of self-invested personal pensions (SIPPs).
A product that has gone through a number of changes over time, Thornton argues the platform still offers many benefits for the right investor.
"Since inception in 1991, SIPPs have changed from a niche product for sophisticated investors to a mass-market offering," he writes.
"The original intent of SIPPs was to provide maximum flexibility within prevailing pension legislation. It is this area that has drawn most attention, with the wide range of investments proving a double-edged sword for providers and investors."
However, with a list of allowable investments no longer published, he writes, it fell to individual providers to determine whether an investment was allowable.
"It also led to the demise of providers who allowed access to investments that proved either unsuitable or fraudulent,” writes Thornton. “This, in turn, led regulators and courts to ask whether providers had a duty of care in assessing not only whether an investment met pension rules, but also suitability for an individual. Furthermore, in many cases, SIPPs have been established to receive transfers from defined benefit schemes – something also under the spotlight."
Despite these issues, writes Thornton, bespoke SIPP platforms have "significant advantages" for the right investors.
"For example, the ability for business owners to hold commercial property through their pension can have significant wider advantages, as well as providing a regular income return for the SIPP,” he said. “Equally, those with investment experience or using a wealth manager can benefit from a wider range of assets and a tailored approach to suit risk profile.
"It is also significant the flexibility of SIPPs is not limited to investment, and can include creating family arrangements as well as more choice around withdrawal of benefits and passing capital to beneficiaries."
Concluding, Thornton said it was important advisers continued to offer flexibility through both SIPPs and small self-administered schemes, alongside technical consultancy, asset and wealth management to ensure clients receive the best advice for their circumstances.
"This advice-led approach ensures investments are not seen as transactional, but are part of an overall retirement strategy bespoke to each client and regularly reviewed," he said.
You can read Thornton's full article on the Financial Adviser website.
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