SIPPs: Range of allowable investments varies widely

Posted on March 1st, 2012 | Categories - News

New research from Defaqto has shown wide differences in the types of investments SIPP providers (Self Invested Personal Pension) will allow.

SIPPs have become more popular over recent years as investors seek to gain greater control over their retirement planning.

SIPP rules allow the member to invest in a wider range of assets than other types of Personal Pension Plans or Stakeholder Pensions. SIPPs have traditionally held assets as diverse as SIPP deposit accounts, directly held shares, gilts or corporate bonds, SIPP commercial property purchase is also extremely popular.

However, as the table below shows, the research from Defaqto has shown a wide divergence between SIPP providers and the types of investment they will allow:

Unit Trusts and OEICS 99%
UK stocks and shares 96%
Investment Trusts 94%
Exchange Traded Funds (ETFSs) 93%
Offshore mutual funds 91%
Hedge funds 88%
Futures and Options 75%
Commercial property 61%
Multi-member commercial property investment 57%
Third party lending 51%

The research emphasises the importance of selecting a SIPP provider based initially on the range of investments the SIPP will allow and then considering other factors such as cost, service and use of technology.

A further factor and one which is often over looked, should be the financial stability of the SIPP provider.

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SIPP investment flexibility

Andy Leggett, Insight Analyst at Defaqto said:  “SIPPs are becoming increasingly popular vehicles for retirement planning. However, the key aspect of a SIPP is the investment flexibility it gives an investor – and our data shows that there is wide-ranging variability between SIPPs in terms of the investment types they allow.

“This is particularly true when it comes to less traditional asset classes, such as commercial property and third party lending.

“This underlines the importance of investors focusing on and understanding features when selecting a SIPP, to ensure they will be able to achieve the investment mix and flexibility they require through the product they choose. Although important, fees should not be the primary basis for comparison.