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Self Invested Personal Pensions - SIPPs - UK - December 2014

“The 2014 Budget reforms have given pension holders greater flexibility and choice at retirement, greatly stirring up the landscape of the pensions’ industry. While income drawdown seems to be the most popular choice among SIPP investors following the Budget announcement, annuities still remain on the books for many, alongside encashment.”
– Chryso Kolakkides, Senior Financial Services Analyst

This report discusses the following key topics:

  • The modular approach could be the key to success
  • Reactions to pension reforms push income drawdown to the top

Self-Invested Personal Pensions (SIPPs) have traditionally been regarded as being for more affluent investors, allowing them to invest in a wide range of non-standard financial products. However, the popularity of early SIPPs, improved technology and the rise of self-directed investing has led to a number of basic, low-cost SIPPs entering the market which have broadened the product’s target audience to include mainstream investors. As a result, the SIPP market has grown impressively in 2013 and is expected to continue in 2014 and throughout the next five years.

Increased regulatory scrutiny is also changing the industry’s landscape with the new capital adequacy regulations coming into force in September 2016. By increasing the minimum capital requirement for SIPP firms, the regulator’s ruling is already exerting increased pressure on the smaller companies. Over the course of 2014, there have been a number of acquisitions from stronger providers and consolidation is likely to continue.

In this report, Mintel examines consumers’ attitudes towards SIPPs. It looks at the channels through which consumers purchase their SIPP, what investments consumers hold within their SIPP and their satisfaction with the range of investments it provides. This report also investigates investors’ behaviour and intentions in terms of SIPP transfers and switching providers, as well as their plans at retirement following the announcement of the Budget pension reforms.

The focus of this report is on Self-Invested Personal Pensions, which are generally defined as personal pensions where the consumer has a wider breadth of choice around the investment options than a normal personal pension.

As SIPPs have traditionally been targeted towards the more affluent investors with higher levels of retirement savings than average, the wealth target market used in Mintel’s consumer research for this report is defined as those with investable assets of at least £50,000 or gross annual household income of at least £100,000.

 

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Table of contents

  1. Introduction

      • Report scope and definitions
        • Abbreviations
        • Executive Summary

            • The market
              • SIPP market is expected to continue on its upward path
                • Figure 1: Forecast of volume of new SIPP sales (at current prices) – fan chart, 2009-19
                • Figure 2: Forecast of value of new SIPP premiums (at current prices) – fan chart, 2009-19
              • SIPP assets under management are approaching £50 billion
                • Figure 3: Total wealth management industry SIPP assets, 2008-13
              • Market factors
                • Confidence is rising among the higher earners and SIPP investors
                  • Key regulatory developments
                    • Nearly three in five investors arranged their SIPP through an adviser
                      • Figure 4: SIPP purchasing methods, July 2014
                    • Companies, brands and innovation
                      • Standard Life holds leading position in SIPP market share in 2014
                        • Consolidation in the SIPP market expected to continue
                          • Consolidation and regulation stifles innovation in SIPP market
                            • SIPP providers supporting advisers
                              • Suffolk Life makes switching SIPPs easier
                                • James Hay succeeds with a modular approach
                                  • The consumer
                                    • SIPP ownership
                                      • SIPP investment ownership
                                        • Figure 5: SIPP Investment ownership, July 2014
                                      • Many investors stick to core investment products
                                        • Figure 6: Number of SIPP investment products owned by SIPP holders, July 2014
                                      • General attitudes and behaviour of SIPP investors
                                        • Figure 7: Investor behavioural habits, July 2014
                                      • Investor satisfaction with SIPP investment range
                                        • Figure 8: Investor satisfaction with SIPP investment range, July 2014
                                      • Investor attitudes towards SIPP transfers
                                        • Figure 9: Investor attitudes towards SIPP transfers, by ‘Yes’ answers, July 2004
                                      • SIPP investors have a strong preference for drawdown over annuities
                                        • Figure 10: Investor plans at retirement, July 2014
                                      • Investor plans to seek advice at retirement
                                        • Figure 11: Investor intentions to seek financial advice at retirement, July 2014
                                      • What we think
                                      • Issues and Insights

                                          • The modular approach could be the key to success
                                            • The facts
                                              • The implications
                                                • Reactions to pension reforms push income drawdown to the top
                                                  • The facts
                                                    • The implications
                                                    • Trend Application

                                                      • Return to the Experts
                                                        • Make It Mine
                                                          • Mintel Futures: Brand Intervention
                                                          • Market Drivers and Regulatory Environment

                                                            • Key points
                                                              • Confidence is rising among the higher earners…
                                                                • Figure 12: How respondents would describe their financial situation, by gross annual household income, September 2014
                                                                • Figure 13: Current financial situation compared to a year ago, by gross annual household income, September 2014
                                                              • …and among SIPP investors
                                                                • Figure 14: Pension investment plans, by SIPP and other pension ownership, July 2014
                                                              • Bank rate cuts hit SIPP firms’ interest income
                                                                • FCA publishes its final capital adequacy requirements…
                                                                  • …ready to stir up the SIPP landscape…
                                                                    • …and accelerate consolidation of SIPP providers
                                                                      • FCA’s thematic review into SIPP providers finds ‘widespread’ failings
                                                                        • Market developments in the wider pension industry
                                                                          • 2014 Budget: a positive development for the SIPPs market
                                                                            • Government to abolish the 55% inheritance tax on pensions funds
                                                                              • SIPP complaints to the FOS soar
                                                                                • Auto-enrolment continues to boost pension participation in the UK
                                                                                • Who’s Innovating?

                                                                                  • Key points
                                                                                    • Consolidation and regulation stifles innovation in SIPP market
                                                                                      • SIPP providers supporting advisers
                                                                                        • Fidelity’s Retirement Service
                                                                                          • Rowanmoor Group’s series of ‘New Insights’ adviser workshops
                                                                                            • AJ Bell’s Infocentre
                                                                                              • Numerous SIPP providers cut their pension charges
                                                                                                • Suffolk Life makes switching SIPPs easier
                                                                                                  • Will James Hay pave the way for a modular approach?
                                                                                                  • Market Size and Forecast

                                                                                                    • Key points
                                                                                                      • SIPP sales nearly doubled in volume in 2013
                                                                                                        • Figure 15: Volume and value of new SIPP business, 2009-13
                                                                                                      • SIPP assets under management are approaching £50 billion
                                                                                                        • Figure 16: Total wealth management industry SIPP assets, 2008-13
                                                                                                      • Growth in new SIPP business is expected to continue over the next five years
                                                                                                        • Figure 17: Forecast of volume of new SIPP sales (at current prices) – fan chart, 2009-19
                                                                                                        • Figure 18: Forecast of value of new SIPP premiums (at current prices) – fan chart, 2009-19
                                                                                                        • Figure 19: Forecast of volume and value of new SIPP business, at current and constant prices, 2014-19
                                                                                                      • Forecast methodology
                                                                                                        • Fan chart explanation
                                                                                                        • Market Share

                                                                                                          • Key points
                                                                                                            • Standard Life holds leading position in SIPP market share in 2014
                                                                                                              • Figure 20: Top 10 SIPP providers, by value of in-force business, as at 1 August 2014
                                                                                                            • Consolidation in the SIPP market expected to continue
                                                                                                            • Companies and Products

                                                                                                              • AJ Bell
                                                                                                                • Company description
                                                                                                                  • SIPP product range
                                                                                                                    • Distribution mix
                                                                                                                      • Recent financial performance
                                                                                                                        • Figure 21: Interim financial data for AJ Bell, H1 2013 and H1 2014
                                                                                                                      • Recent activity
                                                                                                                        • Hargreaves Lansdown
                                                                                                                          • Company description
                                                                                                                            • SIPP product range
                                                                                                                              • Distribution mix
                                                                                                                                • Recent financial performance
                                                                                                                                  • Figure 22: Annual financial data for Hargreaves Lansdown, 2013-14
                                                                                                                                • James Hay Partnership
                                                                                                                                  • Company description
                                                                                                                                    • SIPP product range
                                                                                                                                      • Distribution mix
                                                                                                                                        • Recent financial performance
                                                                                                                                          • Figure 23: Annual financial data for IFG Group PLC and James Hay Partnership, 2012-13
                                                                                                                                          • Figure 24: Half year financial data for IFG Group PLC and James Hay Partnership, 2013-14
                                                                                                                                        • Recent activity
                                                                                                                                          • Standard Life
                                                                                                                                            • Company description
                                                                                                                                              • SIPP product range
                                                                                                                                                • Distribution mix
                                                                                                                                                  • Recent financial performance
                                                                                                                                                    • Figure 25: Half year financial data for Standard Life, 2013-14
                                                                                                                                                  • Recent activity
                                                                                                                                                    • Suffolk Life
                                                                                                                                                      • Company description
                                                                                                                                                        • SIPP product range
                                                                                                                                                          • Distribution mix
                                                                                                                                                            • Recent financial performance
                                                                                                                                                              • Recent activity
                                                                                                                                                              • Brand Communication and Promotion

                                                                                                                                                                • Key points
                                                                                                                                                                  • Decline in overall adspend on pension products
                                                                                                                                                                    • Figure 26: Total advertising expenditure on pensions and retirement income solutions, by sub-category, 2010/11-2013/14
                                                                                                                                                                  • Hargreaves Lansdown holds its position as top SIPP advertiser
                                                                                                                                                                    • Figure 27: Top 10 advertisers of SIPPs, 2011/12-2013/14 (year ending 31 August)
                                                                                                                                                                  • Direct mail accounts for the largest share of adspend on SIPPs
                                                                                                                                                                    • Figure 28: Proportional distribution of adspend on SIPPs of the top 10 advertisers, by media type, 2013/14 (year ending 31 August 2014)
                                                                                                                                                                  • A note on adspend
                                                                                                                                                                  • Channels to Market

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Nearly three in five investors arranged their SIPP through an adviser
                                                                                                                                                                        • Figure 29: SIPP purchasing methods, August 2013 and July 2014
                                                                                                                                                                      • Direct channels still remain popular
                                                                                                                                                                        • Figure 30: SIPP purchasing methods, by age, July 2014
                                                                                                                                                                      • More than half of SIPP investors favour a self-directed management approach
                                                                                                                                                                        • Figure 31: Approach to investment management and decision-making, by SIPP and other pension ownership, July 2014
                                                                                                                                                                    • SIPP and Pension Ownership in Context

                                                                                                                                                                      • Key points
                                                                                                                                                                        • SIPP ownership is low amongst the general population…
                                                                                                                                                                          • Figure 32: Active pension ownership, by scheme type, December 2013
                                                                                                                                                                        • …while workplace pension ownership has increased significantly as a result of auto-enrolment
                                                                                                                                                                          • SIPPs are the most attractive among higher earners
                                                                                                                                                                            • Figure 33: Active pension ownership, by highest rate of income tax paid, December 2013
                                                                                                                                                                        • SIPP Investment Ownership

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Survey background
                                                                                                                                                                              • Figure 34: SIPP and pension ownership among the more affluent segments, July 2014
                                                                                                                                                                            • Mainstream investment vehicles are most popular amongst SIPP investors
                                                                                                                                                                              • Figure 35: SIPP investment ownership, July 2014
                                                                                                                                                                            • Many investors shy away from highly diversified portfolios
                                                                                                                                                                              • Figure 36: Number of SIPP investment products owned by SIPP holders, July 2014
                                                                                                                                                                              • Figure 37: SIPP investment ownership, by number of investment products, July 2014
                                                                                                                                                                            • More streamlined products may be the solution
                                                                                                                                                                              • Financial advice facilitates more complex investments
                                                                                                                                                                                • Figure 38: SIPP investment ownership, by SIPP purchasing method, July 2014
                                                                                                                                                                            • General Attitudes and Behaviour of SIPP Investors

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Nearly two fifths of SIPP investors make regular contributions
                                                                                                                                                                                  • Figure 39: Investor behavioural habits, July 2014
                                                                                                                                                                                • Direct SIPP holders are more likely to mainly use lump-sum contributions
                                                                                                                                                                                  • Figure 40: Investor contribution habits, by SIPP purchasing method, July 2014
                                                                                                                                                                                • Over one third of investors keep a regular check on their SIPP’s performance
                                                                                                                                                                                  • Figure 41: Investor frequency of monitoring SIPP performance, by SIPP purchasing method, July 2014
                                                                                                                                                                                • Men and over-55s tend to be more engaged with their SIPP
                                                                                                                                                                                  • Figure 42: Investor frequency of monitoring SIPP performance, by gender and age, July 2014
                                                                                                                                                                                  • Figure 43: Investor frequency of seeking professional advice, by gender and age, July 2014
                                                                                                                                                                                • Demand for ad hoc advice
                                                                                                                                                                                • Investor Satisfaction with SIPP Investment Range

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • More than one in five are dissatisfied with the range of investments offered by their SIPP
                                                                                                                                                                                      • Figure 44: Investor satisfaction with SIPP investment range, July 2014
                                                                                                                                                                                    • More affluent respondents are more likely to be satisfied with the choice offered
                                                                                                                                                                                      • Figure 45: Investor satisfaction with SIPP investment range, by gender and value of investable assets, July 2014
                                                                                                                                                                                  • Investor Attitudes towards SIPP Transfers

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Transfers into SIPPs are fairly common…
                                                                                                                                                                                        • Figure 46: Investor attitudes towards SIPP transfers, July 2014
                                                                                                                                                                                      • …while transfers out of SIPPs are less frequent
                                                                                                                                                                                        • Over one in five have previously switched SIPP provider
                                                                                                                                                                                        • Investment Plans at Retirement

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Income drawdown is the most commonly chosen approach at retirement
                                                                                                                                                                                              • Figure 47: Investor plans at retirement, July 2014
                                                                                                                                                                                            • Just over one in 10 SIPP investors plan to take their entire pension fund as cash
                                                                                                                                                                                              • Nearly three in 10 are unsure of what they will do at retirement
                                                                                                                                                                                                • Figure 48: Investor plans at retirement, by age, July 2014
                                                                                                                                                                                              • Wealthier SIPP investors are more confident of their retirement plans
                                                                                                                                                                                                • Figure 49: Investor plans at retirement, by value of investable assets, July 2014
                                                                                                                                                                                              • Little significant difference between advised and non-advised investors
                                                                                                                                                                                                • Figure 50: Investor plans at retirement, by SIPP purchasing method, July 2014
                                                                                                                                                                                            • Investor Plans to Seek Advice at Retirement

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Majority of SIPP investors plan to seek professional advice at retirement
                                                                                                                                                                                                  • Figure 51: Investor intentions to seek financial advice at retirement, July 2014
                                                                                                                                                                                                  • Figure 52: Investor intentions to seek financial advice at retirement, by SIPP purchasing method, July 2014
                                                                                                                                                                                                • Nearly three quarters of unsure investors plan to seek advice
                                                                                                                                                                                                  • Figure 53: Investor intentions to seek financial advice at retirement, by plans at retirement, July 2014
                                                                                                                                                                                              • Appendix – Market Forecast

                                                                                                                                                                                                  • Figure 54: Forecast of volume of new SIPP sales – best- and worst-case scenario, 2014-19
                                                                                                                                                                                                  • Figure 55: Forecast of value of new SIPP premiums – best- and worst-case scenario, 2014-19

                                                                                                                                                                                              Companies Covered

                                                                                                                                                                                              • A J Bell Limited
                                                                                                                                                                                              • Cofunds
                                                                                                                                                                                              • Defaqto
                                                                                                                                                                                              • Deutsche Bank AG
                                                                                                                                                                                              • Hargreaves Lansdown Plc
                                                                                                                                                                                              • IFG Group Plc
                                                                                                                                                                                              • James Hay Pension Trustees Limited
                                                                                                                                                                                              • Legal & General Group PLC
                                                                                                                                                                                              • Skandia UK
                                                                                                                                                                                              • Suffolk Life

                                                                                                                                                                                              Self Invested Personal Pensions - SIPPs - UK - December 2014

                                                                                                                                                                                              £1,995.00 (Excl.Tax)