How can you access gold in your SIPP?

In our second Suffolk Life Research Centre project we gauge investor appetite for gold within SIPPs and ask how this asset can be accessed?

The major benefit of choosing a SIPP over a personal pension is the investment flexibility that it offers. Investors with a taste for more esoteric assets are able to incorporate these into a SIPP and so the market has seen steady inflows into a whole range of different areas including commercial property and land to name but a few.

One asset class that has attracted a lot of interest is gold. Always a haven in turbulent economic times, the value of gold has rocketed over recent years as people realise its benefits as a good hedge against inflation as well as its low correlation to other asset classes.

However, despite this burgeoning interest, it remains an asset class that can be hard for individual investors to access. Purchasing physical gold of course is problematic. To begin with purchasing physical gold in the form of gold bars or bullion can be extremely expensive. It also leaves the investor with the added problem of where it should be stored and how it should be transported. Physical gold is also not the most liquid of assets to deal in. However, the evolution of gold exchange traded funds (ETFs) takes away a lot of these challenges and enables investors to invest in this most glittering of asset classes more easily and cost effectively.

The second in our Suffolk Life Research Centre projects canvassed industry opinion on this subject via an email survey of which 115 Retirement Planner readers provided responses.

One question we asked the survey participants was how they had seen the appetite for gold evolve over the past two years. Of those who provided a response to the question 19% said they had seen appetite increase a lot, 44% said they had seen it increase a small amount while 36% said appetite had remained the same. Only 1% of those who provided a response said they had seen the demand for gold decrease by any significant amount.

How is gold being accessed?

So while it seems clear that demand for gold continues it is also important to see exactly how this gold is being accessed by SIPP investors. We asked survey participants whether they currently had any clients with investment portfolios via discretionary fund managers that contain physical gold. 11% of respondees said yes.

We then asked whether they currently recommend exposure to gold within a client portfolio using derivatives such as ETFs, covered warrants or structured products rather than accessing the physical asset. Of those who provided a response 28% said that they did while 72% said they did not recommend exposure to gold in this way.

The survey then asked whether the participant currently recommended physical gold as a direct asset within any client SIPP portfolios. While the vast majority of those responding said no (91%) it is worth noting that a not insignificant 9% of advisers said they were currently recommending investment in physical gold to their clients.

The importance of gold within a retirement planning portfolio

While it may seem that gold investment only forms a small part of the market, it nonetheless is seen as an important option for advisers to offer. We asked survey participants how important they felt it was that physical gold was an allowable asset class for investment within a SIPP.

Participants were asked to rate this importance on a scale of one to five with one being seen as not at all important and five being seen as essential. A whopping 43% of participants said the availability of physical gold as an allowable asset class was not at all important to them. This was followed by 21% of advisers rating it as number two. A further 21% took the middling stance of rating its importance as a three out of five. However, 10% of participants believed the availability of physical gold was important, rating it as four out of a possible five. A further 4% said it was an essential component and rated it full marks.

So while it would seem that physical gold is not one of the more widely used alternative asset classes, it is still utilised well by a decent minority of advisers.

We asked the survey participants how their clients were utilising gold as part of their SIPP portfolio and the reasons given were many and varied. While several advisers said their clients were not interested in investing in gold, one adviser pointed out how clients were utilising gold as they saw it as a good long term investment. Several other advisers said their clients were utilising gold as part of their SIPP portfolio because it provides good diversification benefits against other asset classes such as equities.

As well as direct investment into physical gold the survey participants also highlighted the importance of unit trusts, collectives, ETFs and also exchange traded commodities as ways of accessing and including gold within their retirement portfolio.

So while investment in gold may not be for everyone, there remains a small minority who are convinced that gold can play a significant part in helping them to build a strong and stable retirement income.

How have you seen the appetite for gold evolve over the past two years?

19% Increase a lot
44% Increase a small amount
36% Stay the same
  1% Decrease a lot

Do you currently have any clients with investment portfolios via Discretionary Fund Managers that contain physical gold?

89% No
11% Yes

Do you currently recommend exposure to gold within your client portfolios using derivatives as opposed to physical gold i.e. using ETFs, covered warrants, structured products etc?

72% No
28% Yes

Do you currently recommend physical gold as a direct asset within any client SIPP portfolios?

91% No
9% Yes

How important is it to you that physical gold is an allowable asset class within SIPP products that you recommend to your clients?

4% (5) essential
10% (4)
21% (3)
21% (2)
43% (1) not at all important