Protected Rights - SIPPS

wotsthat

I saw this article in the FT today about protected rights being allowed into SIPP's.

http://www.ft.com/cms/s/06929542-4a27-11db-8738-0000779e2340.html

I seem to remember that this was originally expected in April 2006 but the Government left this step out of the A-Day reforms.

Unfortunately the article doesn't refer to when this may come into force. Does anyone know?

dunstonh

It wasnt allowed whilst SIPPs were unregulated. They become regulated April 07. So it would make sense that it ties in with that and the new tax year.

EdInvestor

A welcome move which should be another boost for SIPPs: they are already booming

FT

Investors are ploughing hundreds of millions of pounds into self-invested personal pensions each month amid signs they are turning their back on traditional insurance companies.Four of the fastest growing Sipp providers are taking combined monthly contributions of more than £300m. One estimate puts the total inflow into Sipps at £30m a day.

Sipp providers say 90 per cent of this money is coming from traditional insurance companies, many of which have been slow off the mark in launching or revamping their pension offerings.The popularity of Sipps have soared since April when the government introduced more flexible contribution rules and wider investment choices.

Standard Life, the largest Sipp provider, is accepting monthly contributions of about £160m, while A.J.Bell(Sippdeal) another provider, is taking £120m a month. Suffolk Life has taken £500m this year, while Hargreaves Lansdown has taken £250m since A-Day.

Andy Bell, managing director of A.J.Bell, said savers were waking up to “the high charges, poor performance and lack of transparency associated with traditional insurance company pension schemes”. He said they were “voting against them with their feet.”

dunstonh

Andy Bell, managing director of A.J.Bell, said savers were waking up to “the high charges, poor performance and lack of transparency associated with traditional insurance company pension schemes”. He said they were “voting against them with their feet.”

Whilst I do like SIPPs (hybrid or full), that is a load of marketing SPIN. SIPPs have higher charges and all the mainstream funds that many people are investing in on SIPPs are available on personal pensions. It is comments like that which have got the FSA concerned that people are investing into SIPPs and paying more in charges than had they used a modern stakeholder or personal pension instead.

EdInvestor

SIPPs have higher charges.

Some do, some don't.Andy Bell's company runs a full service SIPP which does commercial property etc and isn't cheap, and also a no-frills online one with no annual fee, which can be run for virtually nothing.

The point about SIPPS is that you pay for what you get - transparency, as he says.

dunstonh

All SIPPS are more expensive than stakeholder pensions. Especially on like for like terms. Most SIPPS are more expensive than modern personal pensions. Especially on like for like terms.

The point about SIPPS is that you pay for what you get - transparency, as he says.

That doesnt stack up. You have a menu of charges for various events. Then you have a variety of fund management charges (assuming funds which is where most people end up). The charges may be defined but there are multiple levels.

A stakeholder has one charge. The annual managment charge of 1.5% upto 10 years than 1% thereafter. Its still possible to get them without the extra 0.5% for 10 years.

Mono charged personal pensions are just as easily available where the only charge is the AMC. Even some multi-charge personal pensions can do very well. There is one that allows the adviser to take 3% of the contribution, invest in internal funds or a range of external and still come in with a reduction in yield of 0.7% p.a. Making it cheaper than stakeholder.

I like full/hybrid SIPPs and all my actively managed pensions go there now. However, they are not cheaper for investment funds. They are quality and you pay for that quality. If you use the features, then that cost is well spent. If you dont use the features, it is wasted money.

EdInvestor

All SIPPS are more expensive than stakeholder pensions. Especially on like for like terms. Most SIPPS are more expensive than modern personal pensions. Especially on like for like terms.

This simply isn't so unless you are taking about a SIPP provided via an advisor with advice charges incorprated . But the whole point about Self Invested Personal Pensions (SIPPs) is that they are supposed to be DIY.

The cost of a SIPP depends entirely on what services you use within the SIPP, what you invest the money in, how often you trade, how big your fund is (flat rate charges are often very much cheaper for large funds than percentage charges) etc. It's no problem to find SIPPs that are cheaper than stakeholder pensions.

You make a bunch of assumptions many of which may be irrelevant.

dunstonh

This simply isn't so unless you are taking about a SIPP provided via an advisor with advice charges incorprated . But the whole point about Self Invested Personal Pensions (SIPPs) is that they are supposed to be DIY.

You are not comparing like for like though. You are comparing a low cost SIPP against a full cost SHP or PPP. If you compare like for like, either full cost or discount, then the SHP will be cheaper for funds and many PPPs will be.

jem16

dunstonh wrote:

You are not comparing like for like though. You are comparing a low cost SIPP against a full cost SHP or PPP. If you compare like for like, either full cost or discount, then the SHP will be cheaper for funds and many PPPs will be.

Now don't be silly dunstonh - Ed doesn't do like for like comparisons.

EdInvestor

I'm interested to hear about this cheapo SHP which offers a full roster of external funds (let's leave the shares aside for the mo) like a SIPP, at lower cost.

Who's the provider?

dunstonh

Try and keep it on the point:

Andy Bell, managing director of A.J.Bell, said savers were waking up to “the high charges, poor performance and lack of transparency associated with traditional insurance company pension schemes”. He said they were “voting against them with their feet.”

Stakeholder pensions and modern personal pensions do not have high charges. A PPP with 100 or so funds may not offer the range available for a SIPP but if you have the major Inv Perp, Schroder, Gartmore, Fidelity funds etc in there, then that would satisfy the average person. A single charge PPP has a clear single charge structure. Unlike the multiple layers on a SIPP.

The comments made "promoting" SIPPs could be correct of old plans but not modern plans. Enough to make the FSA issue warnings about the use of SIPPs for people who are not using the features when lower charged contracts would be better. Indeed, the FSA also issued a consumer warning about SIPPdeal in their unfair contracts section. One of the companies often referred to as an example of a good SIPP provider.

I will repeat, as it seems to have been missed. I like full/hybrid SIPPs. When the features are used, they can provide good value and the investment options are great. However, when those features are not used and you do not utilise those investment options, the Stakeholder or personal pension is cheaper.