Assessing SIPPs

Claire Brooks takes a look back over the last three Suffolk Life Research Centre projects and discusses some of the key issues

Following the series of survey results from the research centre a number of very interesting points have come out in each area and we will look at them in turn.

Evolving market

When looking at the suitability of a SIPP it was surprising to see that 25% of advisers surveyed thought that over half of their clients were well suited to a SIPP rather than a standard personal pension. This shows the increasing appeal of SIPPs, and although I don’t intend to get into the questions as to what is a SIPP and what isn’t, it appears to be clear to me that what is generally classed as a SIPP these days is getting increasingly closer to a personal pension. This really should not be an issue provided the recommended SIPP product is suitable for the client. 

The biggest difference is the flexibility of SIPPs, and this can be emphasised by features such as in-specie contributions and private equity. The results are very interesting. In-specie contributions show a greater popularity than private equity, with nearly a quarter of advisers surveyed considering their use on constant or regular basis. In contrast, only 3% of advisers have regular experience of clients with private equity requirements. Those who have clients that deal in private equity tend to do so on demand rather than proactively recommending it. In our experience there is more interest in investment grade private equity from discretionary managers wanting to include some in a portfolio for their clients with higher risk profiles rather than held directly by the SIPP trustee. This may be due to the increased risk of holding and administering such investments.

Golden times, or not?

The second research survey looked at the interest in gold as a SIPP investment. Not surprisingly over half of advisers surveyed have seen an increase in the demand for gold over the last two years, with only 1% experiencing a significant decrease. This leads to the question of how investors prefer to hold gold within their SIPPs, direct or through funds.

Given this notable increase in demand, those actually holding gold in one form or another still remains low; 9% of advisers would recommend a direct holding of gold in a SIPP and still only 28% would recommend gold through other means such as ETFs, structured products or covered warrants. Although it is demonstrable that gold investment is a niche investment the levels are still very low.

The most important point that came out from the research was that nearly two thirds of advisers surveyed did not feel that it was very important that a SIPP provider offered physical gold as an allowable asset class with only 4% believing it to be essential. This may be because many providers allow access through other means such as ETFs as they are easier to deal with and there are fewer issues such as storage and liquidity.

Claire Brooks is technical manager at Suffolk Life