Elaine Turtle: My concerns over SIPP consolidation

It is hard to believe that the first SIPP was sold over 30 years ago. In the three decades since the first SIPP was established they have gone from being a niche product aimed at more affluent clients, entrepreneurs or small business owners to being a mainstream pension vehicle. For me, there are 5 key things that have defined and evolved the SIPP sector: Introduction of income drawdown (1995 in its current form) The 1990s saw annuity rates fall and there was a danger that people would get stuck with a poor rate, impacting their long term savings. To partial solve this issue income drawdown was introduced. Income drawdown provided an alternative way to draw an income from a pension fund as long as the pension saver purchased an annuity before they turned 75. While this requirement has now changed, the impact on the SIPP sector of the income drawdown facility was profound. Pension simplification (6 April 2006) The introduction of pension simplification, or A-day as it is more commonly known, introduced sweeping changes to SIPPs and other personal and workplace pensions. While the idea was to simplify the UK pension system, which in the main it did, the unintended consequences have been far reaching and have created more complexity with the annual allowance, lifetime allowance, protections and tapered annual allowances. Complexity doesn't make it easy for pension savers or their advisers and it would be good to see a further review to get us closer to the intended outcomes of pension simplification. Regulation (2007) Regulation has had a huge impact on the SIPP sector, changes are costly to businesses and at times the regulation has been slow to be implemented. There have been a number of high profile court cases that have questioned the regulations and at what point changes can be implemented, i.e. retrospectively. With rulings awaited and the cost of change, regulation, including the capital adequacy rules have had a big impact. Introduction of Pension Freedoms (2015) When the then Chancellor, George Osborne, took to his feet in 2015 to deliver his Budget, no one in the industry, bar a few select people, had any idea what was about to happen and the turmoil that followed. This was the famous Budget where we saw the introduction of Pension Freedoms: “no one will have to buy an annuity”. The impact was profound, and devastating to some annuity firms, there had been no consultation and overnight millions was wiped off their share prices. While it was bad for annuity providers, for the pensions sector, including SIPPs, it provided a huge boost and this continues. Consolidation At one point there were over 120 SIPP providers in the UK but this has been diminishing over time. There have been high profile failures of SIPP business and a lot of consolidation. This consolidation has caused a polarisation in the market, where we have platform-based SIPPs at one end and the bespoke SIPP providers at the other. Some consolidation has been driven by the high costs of regulation, including the capital adequacy rules, some of it because the SIPP business wasn't core to the main business. My concern is that this consolidation will stifle innovation and inhibit the freedoms envisaged by the Chancellor back in 1989. But do I think SIPPs will be around in another 30 years? Yes I do, they are still of huge benefit to advisers and their clients, in particular for passing on of pension assets down through the generations. Former Chancellors Nigel Lawson, Gordon Brown and George Osborne certainly had vision and I look forward to seeing the next chapter in the history of SIPPs. Elaine Turtle is a director at DP Pensions

Elaine Turtle: My concerns over SIPP consolidation

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