A decision to transfer to a self invested personal pension should be based on identifying which product features a customer requires, our experts agreed.
Chris Marshall, senior technical specialist at Hornbuckle, says it may be that the investor’s particular circumstances and requirements mean that a Sipp is the most suitable choice of product, or it may be that better alternatives are available.
To get to the point where that can be understood Mr Marshall says transferring to a Sipp requires the same sort of analysis that would be involved in transferring to any other pension product: would it involve an unjustified increase in costs or might it involve giving up guaranteed or other valuable benefits under the customer’s existing pension plan?
A Sipp enables you to have control over the investment selection process for your retirement savings and it is vital that an adviser grasp is this a power that their client wishes to have.
Investors may choose to make their own investment decisions, prefer for their adviser to manage the fund, or appoint an investment manager.
Sipps offer a wide selection of funds and asset classes, and access to discretionary investment management but if an investor is uncomfortable with a greater array of vehicles an adviser should question the appropriateness of a Sipp.
Investors can use platforms, wraps, stockbrokers, or choose to invest directly with a Sipp, potentially all through a single plan.
Some providers allow investors to select specialist investments such as unlisted company shares and commercial property. Sipp providers will generally have a list of assets they are comfortable in dealing with which advisers can obtain on request.
Charlene Edwards, technical services consultant at AJ Bell, points out consolidation is also a consideration.
Existing pension plans can be transferred and consolidated into one Sipp where appropriate in order to minimise day-to-day administration, as well as offering access to the flexibility described above.
However she says advisers need to remember a Sipp does not offer a guaranteed income at retirement and, due to the increased investment flexibility they provide, the costs for smaller funds may be more expensive when compared to other options, for example a stakeholder pension.
Cost is an issue to contemplate. Most Sipps charge fixed fees for the services they offer, according to Paul Evans, pensions technical manager of Suffolk Life.
As well as offering lower costs for larger funds, Mr Evans says this approach provides transparency, allowing investors to know exactly how much and how often they will be charged for the services they use.
On the downside though a flat fee is unlikely to be unsuitable for investors with smaller funds, Mr Evans observes. These investors are likely to benefit from those that have charges based on the value of the investor’s fund.
Advisers should also be aware of any charges that may apply in the future, such as exit fees.
