INVESTORS have a huge appetite for taking personal responsibility for their retirement income planning, as demonstrated by the growth in the self invested personal pensions (Sipps) market in recent years.
The Sipp "ideal" contrasts with old style pension plans, which could perhaps best be termed "provider dictated". True Sipps deliver all the control and flexibility allowed by the pension rules into the hands of the investor.
However, not all Sip
ps are equal. Many new entrants and an increasing number of established players are choosing to impose their own in-house rules, effectively limiting the investor's room for manoeuvre.
There are three key areas that potential Sipp investors must cover when deciding on the Sipp most suitable for them.
The first is the choice of investments and the ability to build up a diverse portfolio from the best the market has to offer. Sipps should give cost-effective access not only to mainstream asset classes such as managed funds, shares and commercial property, but also to the full range of investments such as land, overseas and residential property funds, quoted and unquoted shares.
The second is to consider whether the Sipp provider allows the investor to continue to use their own preferred service providers and advisers. This may include stockbrokers, discretionary investment managers and also legal experts for those involved, for example, in property purchase.
Finally, advisers and investors need to look not only at the accumulation options, but what choices are available at the point of retirement and beyond. The ideal here is for investors to have a full range of choice to meet their individual circumstances, such as moving such into a scheme pension if appropriate, or into an alternatively secured pension when they turn 75.
Building up a Sipp is a long-term commitment so selecting the right one is not just a question of meeting immediate needs, but of building in future-proofing that can take individual investors to retirement and beyond. The right Sipp can offer one of the most effective ways of smoothing the transition from accumulating assets during a working life into providing flexible income solutions during retirement.
• Mary Stewart is marketing director at Hornbuckle Mitchell
