My last meeting of the year was with a SIPP provider. We discussed the performance of the funds it offered, the value it had offered for the money it had garnered (mainly by combining pension pots built up in the workplace) and we discussed why there was such implacable opposition to what is being called , the “yellow peril”.
There are three views on SIPPs, the first is that of those in occupational pensions who seem to have been in the trenches since personal pensions arrived in 1988, the second belong to a few investment badgers for whom SIPPs are a way of disintermediating life company fees and determining the exact disposition of assets. Everyone’s “bete noir”- Stuart Kirk, falls into this camp. He’s written an article about how clever he is in the FT. As you can probably tell, I have very limited sympathy for either of these views, but – I did enjoy his explanation “why I need to take control of my pension”
I suspect that the vast majority of people in SIPPs have no more control of their pension as those saving in workplace schemes , but what they do have is a sense of owning their decisions because SIPP providers like AJ Bell , Pension Bee and Hargreaves Lansdown have invested in customer service that makes them feel they could have control if they wanted it.
This is frowned upon as “marketing” but it is better explained as “giving people what they pay for” or “value for money”. Most people are not Stuart Kirk and do not dispose of their assets with mathematical precision spending the Christmas break pondering the correlation of asset classes. But they do want quick answers to tricky questions such as “how’s it going?”, “when can I afford to stop work?” and “could I do better elsewhere?”
SIPPs are generally set up to answer these questions rather better than workplace pensions. This is not surprising. Australia taught us that the large industry-wide Super funds haemorrhaged funds to self-managed accounts for a decade. The bleeding has only stopped when the Supers worked out that they could compete by harnessing low costs , high performance to good quality service. Anyone who thinks that Supers would have done this anyway, has something to learn about competition.
SIPPs encourage customers to refer friends to them by providing incentives, this is considered “bad form” and worthy of “flag throwing” by occupational pension schemes. SIPPs are also accused of enticing customers into overseas investment that could be scams. That the overseas investments are in the same publicly quoted bonds and equity funds as are offered by the occupational schemes doesn’t seem to matter. If you are in a DC scheme administered by XPS you will be given an amber flag (yellow card) and marched off for a session with MaPS or that yellow will turn to red.
The folly of all this has not abated since I wrote about it earlier in the year. Nor has the implacable opposition to SIPPs, nor has the continued success of SIPPs to lure money away from workplace pensions. All of this is totally predictable.
In due course, the occupational schemes will either raise their game , and we are seeing some of the master trusts beginning to do this, or they will find themselves denuded of their best custom and die. That is the way of the market.
I hope that those implacably opposed to SIPPs will understand why I’m not and recognise that SIPPs have rather more to teach them , than they currently recognise.