SIPPS - The Pension Product For The New Decade
The start of a new decade inevitably brings with it a look back over the past 10 years and how life has changed. Amongst all the trends developing over the past decade - the rise of reality TV, texting, blogging and tweeting etc - a more serious trend has been widespread public disillusionment with pensions. The demise of final salary schemes and the Equitable Life debacle are just 2 factors which have led to a switch-off from pensions and the development of a "my home is my pension" mentality which even the recent falls in property has not changed. With all their tax reliefs, pensions should be the obvious savings choice by a mile, so what has gone wrong?
Two factors have turned the public off pensions - poor investment returns and a general feeling that they are too complicated (leading to the suspicion of being ripped off). With their flexibility and transparency, SIPPs really should play a major part in overcoming these concerns and getting people saving again.
Moves by SIPP providers towards increased online capability and simple transparent charges have led to products which clients can readily understand and know what they are paying for. It is not all good news though - our recent survey showed that 75% of advisers think SIPP providers unnecessarily impose their own rules on what can be done. For all types of pensions to really succeed, unnecessary red tape and complexity must be kept to a minimum.
Good investment returns are less easy to achieve. The FTSE 100 ended the decade almost 25% lower and it's not the fault of pension schemes that they have struggled in those conditions. SIPPs can maximise returns, though, by picking the best investments and investment managers, and make the best of the bad times and in the good times achieve exceptional returns.
We need to get back to a situation where the public understands pensions and trusts them to give good value for money, and we think SIPPs can play a big part in this. They aren't suitable for everyone and other types of pension have important roles to play, but SIPPs are uniquely placed to deliver what is needed. Will we look back on the next decade and see SIPPs as a major factor in getting the public to feel positive about pensions again? We certainly hope so.
A happy and prosperous New Year to all of you.