Choosing a self-invested personal pensions (Sipp) is no simple task. Assessing which Sipps are appropriate has been made more challenging still by the FSA’s directives on transparency, disclosure and capital adequacy.
According to FSA returns, to the end of 2012 there were around 110 Sipp offerings ranging from transactional-based platforms to full and bespoke Sipps. Each has its own features and confidently selecting the right Sipp for a client, who themselves will have their own individual requirements, is an unenviable task.
But with the RDR now in effect, an IFA must provide a very specific service for a very specific fee. That service will include not only the product delivery but also the total service proposition that accompanies it. A Sipp that assists the adviser to deliver that proposition will therefore contribute to its suitability for the client.
The penalty for a poor selection is the need for a replacement, which brings the inconvenience and costs of the establishment of an alternative and transfer of assets, possibly in-specie, at a cost that might need to be borne by the intermediary.
One pleasing thing is that the world has woken up to the idea that a Sipp provider should not be selected on cost alone. Perhaps at a very basic level, where a transactional platform for securities or collectives is all that is required, it has a higher level of importance.
However, in such a situation – which is where many DIY investors operate – ease of use of the online dealing facility, website robustness, breadth of available collectives and support and online information should also be important. But in this sector, IFAs are often thought unnecessary.
What is important for the clients who do require an adviser? While there are many constituent factors, the overriding and simple answer is they want their Sipp to work when it needs to, create as little hassle in their lives as possible and provide reassurance it will not cause them concern.
Bells and whistles
Each client is different; in the same way that one investment will not suit all, nor will one Sipp from one provider fit all. A client will usually be able to set out their immediate and near needs, but a Sipp should be able to offer all the features an individual will require over their lifetime – in the investment accumulation stage, at vesting and in retirement.
This is where detailed analysis of the wider investments accepted – and those not permitted – must be carried out, as well as any terms or conditions imposed. It is also worth considering whether all benefit options are permitted and, where legislation has allowed, how quickly new facilities such as the alternatively secured pension and flexible drawdown were adopted. This might be an indication of how any new opportunities would be handled.
While features may be a matter of fact, service is unmeasurable but should be a core consideration. It requires a potential leap of faith since without prior usage, the quality of service will come only with experience. However, unless direct involvement with client-related investments is required, most client interaction will be with the intermediary and not the Sipp provider.
