Pension Awards 2016: best Sipp providers

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BEST SIPP (FUNDS ONLY)

Alliance Trust Savings

Time was when self-invested personal pensions (Sipps) were regarded as a niche product, suitable only for the sophisticated investor. But Sipps have come a long way since their launch in 1989, and have evolved into a mainstream retirement vehicle.

Sipps continue to fall into two main categories - those that accept funds and shares (including investment trusts), now often referred to as 'platform-only Sipps' and suitable for the DIY investor, and those accepting commercial property and other more complex investments, known as 'full Sipps'.

How we chose this year's Pension Awards winners

With around one million accounts in existence today, Sipps have been enjoying record success since the pension freedoms. According to Money Management's April 2016 Sipp survey, more than 166,000 new Sipps were established in the year to April 2016.

The same survey also reports that the average Sipp is worth £237,000 (based on 74 Sipp products from 53 providers), and that Sipp accounts hold a total of £146.32 billion.

But with success has come greater regulation. Since 1 September 2016, Sipp providers have had to set aside more money for holding 'non-standard assets' under new capital adequacy rules, triggering a flurry of industry consolidation as weaker providers have been taken over.

Another major issue, for Sipp investors and advisers alike, continues to be that of costs. In a low-return environment, the effect of fees and charges on net investment returns is being scrutinised ever more closely.

Small wonder, then, that Alliance Trust Savings (ATS) scooped the top prize with its fixed charge structure and wide range of collective funds and shares on offer.

Minesh Patel of EA Financial Solutions said: 'Cost is of paramount importance with funds charging a percentage of value, so flat-fee Sipps are important to reduce overall cost - making Alliance Trust an extremely wise choice.'

ATS was ranked second by Justin Modray, founder of website Candid Money, who similarly rated it for its fixed annual fees, 'making it very attractive to investors with modest to large portfolios'.

HIGHLY COMMENDED

Interactive Investor, Standard Life and James Hay

These three highly commended providers were voted first choice by three judges. Justin Modray plumped for Interactive Investor, saying 'it is some way ahead of Alliance Trust Savings in terms of functionality and information'.

Lang Cat's Mark Polson chose Standard Life for 'best pension functionality on platform, tailored drawdown, good natural income options, drawdown portfolios with My Folio and leading discretionary fund management'.

James Hay's Select Sipp was David Trenner's favourite, due to its 'simple structure, with one straightforward charge, which includes fund management and administration'.

BEST SIPP (OFFERING COMMERCIAL PROPERTY)

James Hay and Curtis Banks

The principal distinguishing feature of a full Sipp, as opposed to a platform only/DIY Sipp, is the facility to purchase UK commercial property and certain non-standard assets such as structured products, term deposits, unquoted shares, non-mainstream funds, gold bullion and loans.

UK-based commercial property is deemed by the Financial Conduct Authority to be a 'standard asset'.

It continues to be a popular option for those looking for a reliable long-term investment with the potential for inflation-linked investment returns, thanks to long leases and upward-only rent reviews for UK commercial property.

Commercial property permitted within Sipps includes offices, shops and warehouses; such purchases can be very tax-efficient for investors who are business owners, who can buy their own commercial premises and pay their gross rent into their Sipp.

Worryingly, there has been an upsurge in claims to the Financial Service Compensation Scheme concerning advice given by financial advisers (who are no longer trading) to invest in various non-standard assets within Sipps.

These have usually involved unregulated overseas assets, often offshore property.

Higher capital adequacy requirements for Sipp operators holding non-standard assets have triggered a flurry of consolidation this year, with Talbot & Muir acquiring Attivo, Embark Group buying Rowanmoor, and Curtis Banks acquiring Suffolk Life and the Sipp business of European Pensions Management.

The clear joint winners of this award were James Hay and Curtis Banks (including Suffolk Life), with both being voted first choice by two judges.

David Trenner of Intelligent Pensions said: 'James Hay's modular iSipp is ideal for those clients who think they want property and other specialist investments in their Sipp, but not immediately, as relevant charges do not apply until the particular module is activated.'

In selecting Curtis Banks as his winner, Justin Modray of Candid Money also focused on the issue of costs, an important factor for any Sipp but especially for property purchase. Modray commended the provider for its 'very straightforward and competitively priced proposition'.

HIGHLY COMMENDED

AJ Bell (Platinum Sipp)

Both Modray and Trenner voted AJ Bell their third choice. Modray highlighted AJ Bell's competitive cost structure, while Trenner drew attention to the plight of smaller Sipp providers, who are 'struggling with capital adequacy requirements and facing difficulties with due diligence and unregulated investments'.

In contrast, he said, AJ Bell is 'strongly led by Andy Bell' and is one of the 'better and stronger providers in terms of its administration and technical back-up'.


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