Today, the self-invested personal pension (Sipp) turns 25 years old. The first Sipp was launched on 19 March 1990, and the vehicles have grown in popularity ever since – particularly over the past few years.
Money Management asked some key spokespeople within the Sipp industry what they think has been the highs and lows over the past 25 years, from regulation to investment flexibility.
John Moret, founder of consultancy firm MoretoSIPPs:
“The first Nigel Lawson-style Sipp was taken out in March 1990. Over the next 25 years more than one million investors have followed suit and total Sipp assets are now up to around £150bn. Annual market growth rates have consistently exceeded 15 per cent, fuelled by a number of key events:
• The introduction of income drawdown in 1995;
• The fallout form Equitable Life in 2000;
• A-day in 2006;
• The growth of platforms over the last five to 10 years;
• The new pension freedoms being introduced in April look set to act as another growth trigger.
Unsurprisingly there have been some growing pains, mostly linked to regulation, specifically:
• The chaotic introduction of the regulation of Sipp operators in 2007;
• The recurring reductions in annual and life time allowance;
• The U-turn on residential property investment and the resulting unnecessarily complex taxable property provision;
• Three thematic reviews of Sipp operators;
• The insidious shift of responsibility away from investors;
• The ill-conceived capital adequacy requirements to be introduced in 2016.
Despite the repeated attacks from regulators and legislators the Sipp market has remained very resilient, albeit many Sipps today resemble personal pensions of old – particularly the platform-based variety. The true bespoke Sipp is declining in popularity with the regulatory pressure on operators. That’s sad and hopefully the trend will be reversed with the new pension freedoms. Two million Sipps by 2020 looks a realistic target.”
Martin Tilley, director of technical services, Dentons Pension Management:
“Sadly I’m old enough to remember the launch of Sipps and aside from their introduction, which granted considerable freedom to invest, the best thing was the introduction of income drawdown in 1995. Although drawdown has been through a variety of guises, the flexibility of investment within a Sipp was of little use if you still had to sell the assets and buy an annuity at the chosen benefit date. At that point the control of capital and investment was lost but drawdown provided an extended period of control.
The worst thing that’s happened was the relaxation of controls over who could operate as a Sipp provider, brought about by the FSA’s change in regulation of Sipps in 2007. This permitted entry to the marketplace of some firms whose strategy was too heavily biased towards profit over controls and this has led not only to a tarnishing of the reputation of the industry, but also more stringent regulatory controls which have had the effect of reducing client choice but increasing costs.”
