One in four retirement savers could be wasting money on a high charging SiPP when other cheaper pension options could serve their needs.
The majority of savers (90%) investing in SiPPs (self administered pension plans) tend to hold their cash in a unit trust or OIEC (open-ended investment company) instead of the wider investment options offered with a SiPP.
According to financial firm Skandia, the charging structure of a SiPP is more expensive than a platform pension that offers the same investments at a cheaper cost.
The firm suggests the real benefit of a SiPP is access to more complex investments, but believes mosts savers do not want the extra features. During the survey, around 70% of savers told researchers they do not want to invest in these options, like investment trusts and equities.
Skandia argues a SiPP is not necessarily in the best interest of these retirement savers for a limited additional benefit, as the SiPP is a more expensive wrapper than a platform pension.
Other research by the company suggests 46% of independent financial advisers believe less than 10% of their clients would be better off with a SiPP than a personal pension.
Skandia’s Nick Dixon said: “Since the introduction of SIPPs their popularity has grown significantly and are sometimes positioned as the only pension worth having. This is not in the best interests of the majority of people and there is a danger that many SIPP customers are in the wrong product.
“While a SIPP can offer a wide investment choice and flexibility, our research suggests that many investors aren’t fully utilising the investment flexibility that SIPPs offer and would instead be better off with a platform pension.
“As platform pensions continue to evolve – with the range of assets available and income flexibility increasing – we would expect platform pensions to increasingly replace the need for SIPPs.”
Related Posts :
