SIPPs - UK - December 2015

OVERVIEW
What you need to know
Products covered in this report
EXECUTIVE SUMMARY
The market
Over 1.4 million SIPPs in force
Strong growth in SIPP new business fuelled by RDR regulation
Figure 1: Forecast of the volume of regulated SIPP sales – Fan chart, 2010-20
New pension freedoms set to benefit SIPPs
New cap ad rules will put added pressure on SIPP providers offering non-standard assets
Most new SIPPs are set up online
Companies and brands
The largest operators
Number of SIPP firms has fallen over the past three years
Figure 2: Number of regulated SIPP providers and percentage of total sales by top five providers in each quarter, Q1 2008-Q2 2015
Demand for outsourced administration set to grow
Greater product development activity
The consumer
4% of SIPP investors hold non-standard assets
Figure 3: Investments held within SIPPs, August 2015
Having a good reputation is just as, if not more, important than offering clear and competitive pricing
Figure 4: Most important things required from a SIPP provider, August 2015
Transfers into SIPPs are much more common than transfers out
Figure 5: Transfer and switching activity – Past and future, August 2015
28% of SIPP investors are planning to move into drawdown
Figure 6: How SIPP investors expect to access and use their fund at retirement, August 2015
What we think
ISSUES AND INSIGHTS
New opportunities for SIPP providers as a result of new pension freedoms
The facts
The implications
SIPP providers with significant exposure to non-standard assets are vulnerable under new cap ad rules
The facts
The implications
Regulatory intervention threatens retained interest income stream
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Increased demand leads to higher sales volumes
New pension freedoms will benefit SIPPs…
…but in an environment of greater regulatory pressures
Most new SIPPs are set up by advisers, although the D2C market is growing
MARKET SIZE AND FORECAST
The market is currently worth £168 billion
Figure 7: Volume and value of SIPPs in force, as at August 2015
Market continues to expand
New business flourishes under the post-RDR regime
Figure 8: Number of regulated SIPP sales, 2010-15
Pension freedoms will help boost future SIPP sales
Figure 9: Forecast of the volume of regulated SIPP sales – Fan chart, 2010-20
Figure 10: Forecast of new SIPP business, at current and constant prices, 2015-20
Forecast methodology
CHANNELS TO MARKET
Most SIPPs are sold with advice
Advice firms generate the largest share of SIPP sales
Figure 11: Proportion of FCA-regulated SIPP sales, by firm type, 2014
MARKET DRIVERS
Factors influencing market growth and dynamics
New demand drivers
Macroeconomic and investment conditions
REGULATORY AND LEGISLATIVE CHANGES
Less than a year to go before firms need to adhere to higher capital adequacy requirements
Basel III threatens to lower already paltry interest rates on cash deposits
FCA modifies disclosure rules
FCA warns SIPP operators to ensure full compliance
Increased pension freedoms create new opportunities
Cuts to pension tax relief will impact some SIPP investors
Workplace auto-enrolment raises profile of retirement saving
FSCS increases adviser levy to cover cost of rising SIPP claims
Changes to CASS create additional pressures on firms
Platforms amend pricing structures in response to new rules
KEY PLAYERS – WHAT YOU NEED TO KNOW
The largest operators
More mergers and acquisitions likely
Demand for outsourced administration set to grow
Greater product development activity
MARKET SHARE
Standard Life is the largest SIPP administrator by value of in-force business…
…while Hargreaves Lansdown takes the number one spot in terms of volume
Many of the larger firms are reporting strong new business inflows
Figure 12: Top 14 SIPP providers, by value of in-force business, mid-2015
COMPETITIVE STRATEGIES
Market consolidation
The number of SIPP providers has declined over the past three years
Figure 13: Number of regulated SIPP providers and percentage of total sales, by top five providers in each quarter, Q1 2008-Q2 2015
Top five generate around 80% of sales
Recent mergers and acquisitions
SIPP administration developments
Expected growth in third-party administration
Other distribution developments
Hornbuckle and Prudential forge alliance
James Hay agrees SIPP client transfer deal with Towry
LAUNCH ACTIVITY AND INNOVATION
Recent trends
Offshore SIPP provider rebrands and launches new SIPP
Aviva unveils a direct-to-consumer platform SIPP
Curtis Banks launches a short-term drawdown product
Xafinity relaunches its SimplySIPP
ADVERTISING AND MARKETING ACTIVITY
Pension adspend doubles in the year to September 2015, but is still small relative to the size of the market
Figure 14: Top ten advertisers of above-the line, online display and direct mail advertising expenditure on pension products, 2012/13-2014/15
SIPP adspend appears to be minimal
Figure 15: Above-the line, online display and direct mail advertising expenditure on SIPPs, by media type (selected providers only), 2014/15
Nielsen Media Research coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
The typical SIPP investor
4% of SIPP investors hold non-standard assets
Having a good reputation is just as, if not more, important than offering clear and competitive pricing
Transfers into SIPPs are much more common than transfers out
28% of SIPP investors are planning to move into drawdown
SIPP INVESTMENT PORTFOLIO
4% of respondents hold non-standard assets…
…while 32% hold cash deposits or cash funds
Figure 16: Investments held within SIPPs, August 2015
QUALITIES SOUGHT IN A SIPP PROVIDER
55% of SIPP investors say they look for a well-established company with a good reputation…
…while 31% want the broadest possible range of investment choices
Just 1% give importance to mobile apps
Figure 17: Most important things required from a SIPP provider, August 2015
TRANSFER AND SWITCHING ACTIVITY
18% of SIPP investors are likely to consider switching provider within three years…
…while 15% may transfer funds out of their SIPP into another scheme
Figure 18: Transfer and switching activity – Past and future, August 2015
DECUMULATION PLANS
33% of SIPP investors have yet to make any decumulation plans
28% are likely to opt for flexi-access drawdown
8% expect to go down the UFPLS route
Figure 19: How SIPP investors expect to access and use their fund at retirement, August 2015
23% of SIPP investors do not expect to take professional advice regarding their decumulation plans
Figure 20: Likelihood or seeking professional financial advice regarding decumulation plans, August 2015
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Consumer research methodology
Abbreviations
APPENDIX – MARKET SIZE AND FORECAST
Total market forecast – Best- and worst-case scenarios
Figure 21: Forecast of regulated SIPP sales – Best- and worst-case scenarios, 2015-20
Forecast methodology