Question: What impact will the growth in SIPPs and introduction of personal accounts have on the personal pension market?

Each month we ask our industry to answer one big question!

- Nick Bladen is head of pensions & bonds marketing at Skandia

In research carried out for Skandia by Marketing Sciences*, 54% said that the government should make saving into a pension compulsory. Only 8% said they would reduce contributions to other savings once auto enrolled and this suggests that the arrival of personal accounts would not negatively affect other savings vehicles. For personal accounts to remain in the best interests of consumers they have to be transferable. Ongoing membership of personal accounts and the flexibility of retirement solutions will naturally evolve with the size of the accumulated pension fund, fundamental needs, wisdom and the appetite for tailored solutions.

The growth of SIPPs is a different issue with the target market typically being mass affluent and high net worth. Increased SIPP sales imply a growth in the number of investment-savvy clients.

Historically the growth in popularity of multi-manager personal pensions has equalled that of SIPPs. Both will continue to be successful in the retirement market but transfers from older style pension products account for a high number of investments into more flexible retirement solutions. The final design of personal accounts must take this into account and give the consumer the flexibility to move their investment should it be advisable to do so.

* The 'Retirement Planning Monitor', a survey of 1000 UK adults aged 22-64 conducted on behalf of Skandia by Marketing Sciences

- Peter Carter is head of product marketing at Met Life UK

SIPPs and personal accounts will change the personal pensions market but what they will not change is the need for advice in some shape or form. SIPPs are suitable for larger funds while personal accounts will be suitable for those with smaller funds so any changes will be in different market segments.

Personal accounts will change the landscape for company schemes - the National Association of Pension Funds research shows around 18 % of companies will transfer their pension schemes to personal accounts although nearly half of companies say they will have no effect.

The growth in SIPPs is evidence that flexible and innovative products are in demand and can be successful.

Advisers need to ensure that SIPPs are appropriate for clients as paying extra charges for a SIPP and then not using the additional investment flexibility is not good advice.

In reality only a minority of clients are likely to need the additional flexibility offered by SIPPs which will limit the impact on the market as a whole.

- Ray Chinn is head of pensions at LV=

We are looking at issues here much wider than types of pension product. What we have seen through the growth of SIPPs post A-Day and the increased commentary around the launch of personal accounts in 2012 is a widening of the debate into the public arena. For those who already have made provisions for their retirement, the changes introduced at A-Day certainly have simplified retirement planning. Simplifying how people accumulate retirement funds via personal accounts should have the same positive effect on those who are not currently saving. To this end, what we end up calling the market or the products within it is largely irrelevant. We have an opportunity to work with Government and regulators to ensure that legislation and solutions are developed to enable everyone to benefit from saving for retirement and enjoying their retirement funds once they need them. Let's not forget that what we should all be striving for is a system that avoids the current danger of a generation of pension paupers. My sense is that this change is now beginning to happen.

- Andrew Gadd is head of research at The Lighthouse Group

The growth in SIPPs and the introduction of personal accounts will inevitably have an impact on the shape of pensions planning. Personal accounts will start in 2012 but if the experience of stakeholder pensions is anything to go by, we will see significant changes in the pensions market well before then.

Personal accounts do present plenty of opportunities. The major one for an employer not currently offering a contributory scheme (they all must offer stakeholder) is that in order for the employer to get any kudos from doing so they must either act well before personal accounts arrive or go for an exempt scheme providing better benefits than personal accounts.

If an employer takes neither step then inevitably their employees will rightly regard the arrival of personal accounts as being something their employer simply had to do and therefore see no kindess in their introduction. Acting now, by perhaps using a mixture of salary sacrifice and part of any upcoming annual employee inflationary pay rise to cover part of the cost of employer contributions, will help the employer to manage out the initial shock of the costs associated with the advent of personal accounts and potentially improve employer/employee relations.

- John Glendinning is director of pensions development at Prudential

The starting point must be what investment options do consumers want? Some of the growth in SIPPs has been people buying personal pensions with options to widen the investments later. The differences between traditional SIPPs and personal pensions have become blurred. Many personal pensions now have such extensive fund ranges and allow wider investments at additional cost, and some of the charges for commonly used assets in traditional SIPPs have been reduced. The choice between the different types of SIPP may be down to which can deliver investment solutions efficiently for the customer and adviser. That may depend more on the company than the legal structure.

We have yet to see the final design for personal accounts. We have also to receive a clear picture of the FSA's requirements on selling personal pensions once personal accounts are available, and in particular any RU64 type issues.

However, personal accounts seem unlikely to be a threat in the personal pensions market if, as expected, their investment options are limited and contributions are capped at £3,600 (increased by inflation from 2005). But pressure continues to allow higher contributions and we need to watch that and other design aspects as the reforms move forward.

- Steve Herbert is head of benefits strategy at Origen

By far the biggest impact on both individual personal pension plans and group personal pension plans (GPP) will be the proposed introduction of personal accounts.

It is likely that personal accounts will significantly reduce the market for individual personal pension plans, given that personal accounts are likely to do much the same job for many savers, but often at a lower cost. The exceptions in this market are likely to be for savers who take an active interest in their investment choice, or utilise financial advice. This grouping is likely to retain the more sophisticated personal pension, possibly with the SIPP option being utilised as well.

The GPP market is likely to better weather the introduction of personal accounts. In order to appear competitive with, and better than, personal accounts, GPPs will need to continue to evolve and offer sophistication and features that personal accounts are unlikely to be able to match. Examples of such features are salary sacrifice, significant fund choices and effective online solutions. An important point to note is that many GPPs can already be written as a deferred SIPP contract, thus providing individual employees with the ability to utilise SIPP functionality as, and when, required (which personal accounts will struggle to do).

- Robin Hooper is managing director of The Lifetime SIPP Company

We deprecate the fact that ongoing means-testing of the pension credit will make lower paid employees worse off by being 'forced' into personal accounts - which could anyway end up as an administrative and data security nightmare, given this government's recent track record.

This said, it is most unlikely that the introduction of this new pension scheme will affect the type of clients for whom professional advisers feel self invested personal pensions to be appropriate.

However low the charging structure for personal accounts, it is unlikely that they will offer the same level of cost effective access to highly flexible investment options as is the case with SIPPs.

In any event, a high proportion of lifetime SIPPs arranged by advisers include commercial property and some of the more unusual investments that are likely to be inaccessible under personal accounts and would be unlikely to appeal to those investors for whom low level contributions are appropriate.

- Richard Mattison is business development director at IPS Partnership

Datamonitor predicts that SIPP numbers will continue to grow at a compound rate of 14% per annum.

However, there is a possibility that this could be over optimistic when personal accounts are introduced, as this compulsory form of retirement saving could discourage large numbers from making any other form of retirement planning. There is an important role for financial advisers and pension providers to fulfil in spreading the word that personal accounts are likely to be one of the biggest mistakes ever created, and any finance director should be encouraged to avoid engaging with the personal accounts delivery authority or whatever the eventual organisation will be called. In addition it is important to communicate that the level of saving required by personal accounts is unlikely to be sufficient to cover anything more than a most basic standard of living in retirement, and significant additional saving will be required for those who wish to enjoy a comfortable retirement. As a result there may well be a growth in popularity of group SIPPs or GPPs established by employers rather than contributing to personal accounts, and of individual SIPPs for those making top-up retirement saving.

- Mike Morrison is pension strategy manager at Winterthur

I think it is important to make the point that SIPPs are personal pensions and are regulated by the FSA as personal pensions. As such, there are SIPPs which offer a full range of permissible investments and those that just offer a smaller range of funds. So it might depend on who decides to call their products 'SIPPs' and who persists with calling them 'personal pensions'.

An all round greater awareness of investments has, I think, meant that we have moved away from the days when consumers would just accept a limited fund range that gives average performance.

- Pamela Reid is head of the Bristol office at Citi Quilter

With more people using SIPPs or personal accounts it will mean more discussion about them in the press, which undoubtedly will lead to more people reviewing their pension arrangements. Equally, as the numbers grow, the market becomes more attractive to the big players in the pension environment, resulting in increased investment in IT infrastructures and marketing.

We have recently seen in the pensions arena that if a company is left behind they often open their cheque book to acquire the administrators! Furthermore emphasis is given to cost, and the old style 'inclusive' charges are gradually being unwrapped so each component of administration, advice and investment management is calculated and paid for separately.

Personal pensions are really about investment flexibility and increasing the retirement options. For this to develop in the mass market, especially through personal accounts, assistance is needed to help the general public gain an understanding of financial markets and investment management arrangements.

- Stuart Russell is head of self invested pensions at Xafinity

With the impending change to legislation on 1 October 2008 to allow protected rights to be held in SIPP it is likely that there will be a shift away from insured personal pension products towards SIPP.

Prior to this there was little choice but to contract out via insured products. Now that the playing field has been levelled there seems no reason to opt for an insured personal pension given that a SIPP provides much greater investment flexibility.

It is difficult to gauge what effect personal accounts might have on the personal pension market. Those employers who already have schemes suitable for auto enrolment may see an increased take up hence boosting the market. Alternatively, personal accounts as the default may be seen as an easier option than their current scheme provision leading to a market reduction.

Additionally, given the growth in group SIPP it is possible that more current employer schemes and indeed any new schemes may opt for Group SIPP.

- Andrew Tully is senior pensions policy manager at Standard Life

In real terms, individual personal pension premiums have halved over the last 15 years, with the drop largely being replaced by increases to stakeholder pensions and self-invested personal pensions (SIPP).

SIPPs will continue to take market share, especially towards the top of the market. Standard Life believes SIPP funds under management will double to £100 billion by 2011 driven by ongoing consolidation, including the ability to self-invest protected rights from October this year, and new retirement options which give people more flexibility and control when they come to take benefits.

Personal accounts, when they are introduced, will eat into the personal and stakeholder pension market, with some people at the lower end of the market who save regular small amounts using personal accounts in future. So it is likely that the individual personal pension market will be squeezed from both ends.