SIPPs need a lifeboat fund for their pensioners


For the second March in three years, people with their retirement money exposed to world stock markets, will be breathing heavily and trying to avoid looking at the value of their funds.

I am writing, not for those immunised from market shocks by personal riches – the genuinely wealthy, but the mass affluent, many of whom own SIPPs valued in hundreds of thousands of pounds, typically seeded by transfers from defined benefit pension schemes.

For them, there is no risk register containing items  such as “global pandemic” and “threat of WWIII”.  The first twenty years of this century look years of relative calm, though not if you lived in Syria, Yemen or large parts of China.

While the world worried about Covid, Putin plotted and while Putin plotted, the ice-caps were still melting. The long-term existential threat has not gone away, because of C-19 or Russian aggression.

The store of wealth in self-invested personal pension is still generally in balanced portfolios with an allocation of 60% to global equities and 40% in bonds of various kinds. The likelihood (according to the FT) is that money will continue to flow into equities – (some £240bn this month) just to rebalance portfolios where bonds may now exceed equity valuations.

Or as Alliance Bernstein’s spokesperson told the FT

Investors do face sharp choices. The prospect of lower returns ahead will force a rethinking of portfolios. But equities remain a core portfolio anchor for any investor seeking to beat inflation, whether that is a pension scheme, sovereign wealth fund, endowment or a family office

I suspect that “sharp choices” is not what a lot of those who transferred with the help of IFAs signed up to.

Back in the heady days of 2016-2019, £80bn of wealth stored in defined benefit pension schemes transferred to funds directly exposed to world markets.


The flows have only stemmed because the cost and availability of transfer advice has made it hard for people to “unlock their pensions”

Concern from the FCA has prompted a hike in professional indemnity costs. Many advisers have closed for new transfer business and some have closed altogether. The FT reports that advisers willing and able to provide transfer advice has fallen by 60%, many advisers have quotas for the number of cases they can take on. And the means to charge for the advice has changed meaning members can no longer pay on a “no win – no fee” basis, they pay whether the transfer goes ahead or not.

For many who transferred , the advice has dried up altogether. Many advisers who focussed on transfer business have gone out of business meaning that sharp choices which were supposed to be taken “with advice” are being taken with the help of articles on the internet or conversations on Facebook or the pub.

Although the FCA report only a modest fall in overall adviser numbers to 36,377 in 2021 from 36,401 in 2019, they report that more than 50 IFA firms are currently under investigation for poor transfer advice.

The net result for consumers is

  1. More direct exposure to value destruction from volatile equities
  2. Less help from advisers at a tricky time
  3. The prospect of more of this to come through retirement.

Some – not all – of the £80bn sitting in SIPPs today, is money that should be there, money that is providing people with freedom they would not have enjoyed in a DB scheme. But some – and perhaps as much as half, is money that had better stayed where it was, paying an income that supplemented the state  pension as a wage for life.

It is time we seriously addressed not just the advice that took people to a position of vulnerability, but solutions that can take them out of the current position they find themselves in.

That is why I am writing about, and promoting, the emergence of new funds that can provide people with better prospects of lifetime income without the worry that they experience today.

If you are interested in how this might work, you might like to click this link to my most recent blog on the matter.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to SIPPs need a lifeboat fund for their pensioners

  1. Dave C says:

    I’m confused why you’d be in a SIPP, but operate it like a DC pension (which are all allocated similarly if you go with passive defaults), and then complain when the value goes up and down.

    You’re no worse off than almost everyone else who is now in DC.

    Even if you self-invest in your SIPP, then I hope you’ll accept your choices can give good returns and bad returns.

    If they’ve been mis-sold then that’s a problem. But what does that have to do with SIPPs?

    CDC sounds too good to be true. If pensions can’t work as DB promises, or individual DC pots, how does bundling DC into combined pots make them work?

    Shuffling and rearranging deckchairs to increase seating capacity? There are only so many chairs! And using more chairs up for regulatory and policy bottoms is likely to just take away more seats, than provide more,

  2. Pingback: A pension is a bleeding pension – pass me the aspirin! | AgeWage: Making your money work as hard as you do

  3. John Moret says:

    In launching SIPPs in 1989 Nigel Lawson said I propose to make it easier for people in personal pension schemes to manage their own investments. This discussion is really about the merits of individual responsibility against collectivism. Scams and frauds and the interventions by FOS and CMCs have led to the virtual elimination of caveat emptor. Reduction or elimination of risk should lead to reduction in potential rewards but it seems that some want to go further and move to a “heads I win tails you lose” environment which will inevitably lead to less choice. And just a reminder that the majority of SIPPs aren’t funded by DB transfers. If the £80bn figure is correct that represents less than 25% of the total funds in SIPPs today.

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