Skandia: SIPPs in danger of being used unnecessarily

SIPP investors who have the vast majority of their assets held in Unit Trusts or OEICs may be better off using a platform pension due to cost, says Skandia.

According to the group's recent Adviser Barometer, one in four people who invest in a SIPP have 90% or more of their assets held in either a Unit Trust or OEIC. With the charging structure of a SIPP generally more expensive than a platform pension, Skandia questions whether SIPP is suitable for investors who do not engage with a wide range of investments.

Nick Dixon, marketing director at Skandia said: "There is a danger that many SIPP customers are in the wrong product."

In addition, half (46%) of advisers believe that just one in ten or less of their customers would be better off with a SIPP than a personal pension.

The survey also revealed that 70% of investors who have a SIPP do not use it to invest in ETFs, 60% do not invest in investment trusts, and 45% do not use it to invest in direct equities. Skandia believes this indicates SIPPs are more suitable for those with bespoke investment needs.

Dixon added: "Since the introduction of SIPPs their popularity has grown significantly and are sometimes positioned as the only pension worth having. This is not in the best interests of the majority of people and there is a danger that many SIPP customers are in the wrong product. While a SIPP can offer a wide investment choice and flexibility, our research suggests that many investors aren't fully utilising the investment flexibility that SIPPs offer and would instead be better off with a platform pension.

"As platform pensions continue to evolve - with the range of assets available and income flexibility increasing - we would expect platform pensions to increasingly replace the need for SIPPs."