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SIPPs - UK - December 2015

“The new pension freedoms, introduced in April 2015, will encourage growth in SIPPs, in both the accumulation and decumulation stage. However, to fully capitalise on this opportunity, operators will need to promote the benefits of investing in a SIPP more widely, including among the mass market, and have the economies of scale to effectively meet the expected large increases in demand.”
– Sarah Hitchcock, Senior Analyst – Financial Services

This report discusses the following key topics:

  • New opportunities for SIPP providers as a result of new pension freedoms
  • SIPP providers with significant exposure to non-standard assets are vulnerable under new cap ad rules
  • Regulatory intervention threatens retained interest income stream

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
      • Executive Summary

          • The market
            • Over 1.4 million SIPPs in force
              • Strong growth in SIPP new business fuelled by RDR regulation
                • Figure 1: Forecast of the volume of regulated SIPP sales – Fan chart, 2010-20
              • New pension freedoms set to benefit SIPPs
                • New cap ad rules will put added pressure on SIPP providers offering non-standard assets
                  • Most new SIPPs are set up online
                    • Companies and brands
                      • The largest operators
                        • Number of SIPP firms has fallen over the past three years
                          • Figure 2: Number of regulated SIPP providers and percentage of total sales by top five providers in each quarter, Q1 2008-Q2 2015
                        • Demand for outsourced administration set to grow
                          • Greater product development activity
                            • The consumer
                              • 4% of SIPP investors hold non-standard assets
                                • Figure 3: Investments held within SIPPs, August 2015
                              • Having a good reputation is just as, if not more, important than offering clear and competitive pricing
                                • Figure 4: Most important things required from a SIPP provider, August 2015
                              • Transfers into SIPPs are much more common than transfers out
                                • Figure 5: Transfer and switching activity – Past and future, August 2015
                              • 28% of SIPP investors are planning to move into drawdown
                                • Figure 6: How SIPP investors expect to access and use their fund at retirement, August 2015
                              • What we think
                              • Issues and Insights

                                • New opportunities for SIPP providers as a result of new pension freedoms
                                  • The facts
                                    • The implications
                                      • SIPP providers with significant exposure to non-standard assets are vulnerable under new cap ad rules
                                        • The facts
                                          • The implications
                                            • Regulatory intervention threatens retained interest income stream
                                              • The facts
                                                • The implications
                                                • The Market – What You Need to Know

                                                  • Increased demand leads to higher sales volumes
                                                    • New pension freedoms will benefit SIPPs…
                                                      • …but in an environment of greater regulatory pressures
                                                        • Most new SIPPs are set up by advisers, although the D2C market is growing
                                                        • Market Size and Forecast

                                                          • The market is currently worth £168 billion
                                                            • Figure 7: Volume and value of SIPPs in force, as at August 2015
                                                          • Market continues to expand
                                                            • New business flourishes under the post-RDR regime
                                                              • Figure 8: Number of regulated SIPP sales, 2010-15
                                                            • Pension freedoms will help boost future SIPP sales
                                                              • Figure 9: Forecast of the volume of regulated SIPP sales – Fan chart, 2010-20
                                                              • Figure 10: Forecast of new SIPP business, at current and constant prices, 2015-20
                                                            • Forecast methodology
                                                            • Channels to Market

                                                              • Most SIPPs are sold with advice
                                                                • Advice firms generate the largest share of SIPP sales
                                                                  • Figure 11: Proportion of FCA-regulated SIPP sales, by firm type, 2014
                                                              • Market Drivers

                                                                • Factors influencing market growth and dynamics
                                                                  • New demand drivers
                                                                    • Macroeconomic and investment conditions
                                                                    • Regulatory and Legislative Changes

                                                                      • Less than a year to go before firms need to adhere to higher capital adequacy requirements
                                                                        • Basel III threatens to lower already paltry interest rates on cash deposits
                                                                          • FCA modifies disclosure rules
                                                                            • FCA warns SIPP operators to ensure full compliance
                                                                              • Increased pension freedoms create new opportunities
                                                                                • Cuts to pension tax relief will impact some SIPP investors
                                                                                  • Workplace auto-enrolment raises profile of retirement saving
                                                                                    • FSCS increases adviser levy to cover cost of rising SIPP claims
                                                                                      • Changes to CASS create additional pressures on firms
                                                                                        • Platforms amend pricing structures in response to new rules
                                                                                        • Key Players – What You Need to Know

                                                                                          • The largest operators
                                                                                            • More mergers and acquisitions likely
                                                                                              • Demand for outsourced administration set to grow
                                                                                                • Greater product development activity
                                                                                                • Market Share

                                                                                                  • Standard Life is the largest SIPP administrator by value of in-force business…
                                                                                                    • …while Hargreaves Lansdown takes the number one spot in terms of volume
                                                                                                      • Many of the larger firms are reporting strong new business inflows
                                                                                                        • Figure 12: Top 14 SIPP providers, by value of in-force business, mid-2015
                                                                                                    • Competitive Strategies

                                                                                                      • Market consolidation
                                                                                                        • The number of SIPP providers has declined over the past three years
                                                                                                          • Figure 13: Number of regulated SIPP providers and percentage of total sales, by top five providers in each quarter, Q1 2008-Q2 2015
                                                                                                        • Top five generate around 80% of sales
                                                                                                          • Recent mergers and acquisitions
                                                                                                            • SIPP administration developments
                                                                                                              • Expected growth in third-party administration
                                                                                                                • Other distribution developments
                                                                                                                  • Hornbuckle and Prudential forge alliance
                                                                                                                    • James Hay agrees SIPP client transfer deal with Towry
                                                                                                                    • Launch Activity and Innovation

                                                                                                                      • Recent trends
                                                                                                                        • Offshore SIPP provider rebrands and launches new SIPP
                                                                                                                          • Aviva unveils a direct-to-consumer platform SIPP
                                                                                                                            • Curtis Banks launches a short-term drawdown product
                                                                                                                              • Xafinity relaunches its SimplySIPP
                                                                                                                              • Advertising and Marketing Activity

                                                                                                                                • Pension adspend doubles in the year to September 2015, but is still small relative to the size of the market
                                                                                                                                  • Figure 14: Top ten advertisers of above-the line, online display and direct mail advertising expenditure on pension products, 2012/13-2014/15
                                                                                                                                • SIPP adspend appears to be minimal
                                                                                                                                  • Figure 15: Above-the line, online display and direct mail advertising expenditure on SIPPs, by media type (selected providers only), 2014/15
                                                                                                                                • Nielsen Media Research coverage
                                                                                                                                • The Consumer – What You Need to Know

                                                                                                                                  • The typical SIPP investor
                                                                                                                                    • 4% of SIPP investors hold non-standard assets
                                                                                                                                      • Having a good reputation is just as, if not more, important than offering clear and competitive pricing
                                                                                                                                        • Transfers into SIPPs are much more common than transfers out
                                                                                                                                          • 28% of SIPP investors are planning to move into drawdown
                                                                                                                                          • SIPP Investment Portfolio

                                                                                                                                            • 4% of respondents hold non-standard assets…
                                                                                                                                              • …while 32% hold cash deposits or cash funds
                                                                                                                                                • Figure 16: Investments held within SIPPs, August 2015
                                                                                                                                            • Qualities Sought in a SIPP Provider

                                                                                                                                              • 55% of SIPP investors say they look for a well-established company with a good reputation…
                                                                                                                                                • …while 31% want the broadest possible range of investment choices
                                                                                                                                                  • Just 1% give importance to mobile apps
                                                                                                                                                    • Figure 17: Most important things required from a SIPP provider, August 2015
                                                                                                                                                • Transfer and Switching Activity

                                                                                                                                                  • 18% of SIPP investors are likely to consider switching provider within three years…
                                                                                                                                                    • …while 15% may transfer funds out of their SIPP into another scheme
                                                                                                                                                      • Figure 18: Transfer and switching activity – Past and future, August 2015
                                                                                                                                                  • Decumulation Plans

                                                                                                                                                    • 33% of SIPP investors have yet to make any decumulation plans
                                                                                                                                                      • 28% are likely to opt for flexi-access drawdown
                                                                                                                                                        • 8% expect to go down the UFPLS route
                                                                                                                                                          • Figure 19: How SIPP investors expect to access and use their fund at retirement, August 2015
                                                                                                                                                        • 23% of SIPP investors do not expect to take professional advice regarding their decumulation plans
                                                                                                                                                          • Figure 20: Likelihood or seeking professional financial advice regarding decumulation plans, August 2015
                                                                                                                                                      • Appendix – Data Sources and Abbreviations

                                                                                                                                                        • Data sources
                                                                                                                                                          • Consumer research methodology
                                                                                                                                                            • Abbreviations
                                                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                                                              • Total market forecast – Best- and worst-case scenarios
                                                                                                                                                                • Figure 21: Forecast of regulated SIPP sales – Best- and worst-case scenarios, 2015-20
                                                                                                                                                              • Forecast methodology

                                                                                                                                                              Companies Covered

                                                                                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                                                                                              SIPPs - UK - December 2015

                                                                                                                                                              £1,995.00 (Excl.Tax)