Despite a myriad of customer complaints over mis-selling, the UK self-invested personal pension (Sipp) market is booming. The Sipp market is reportedly set to grow £1.9bn a year up to 2020.
Sipp market growth
Research from GlobalData shows that the UK Sipp market is currently worth £2.4bn in new business annual premium equivalent. This figure shows a 55 percent increase from £1.5bn in 2016.
The introduction of pension freedoms in 2015 is being posited as a likely reason for Sipps’ rise in popularity.
Since the arrival of pension freedoms, the amount of people transferring out of their final salary pension has soared. The figures depict that people are hoping to take advantage of sky-high transfer values. They will do this by moving their funds into personal pensions and defined contribution schemes.
Data from the watchdog revealed that £20.8bn was transferred out in 2017. This is more than double the amount registered in the previous year.
The sudden soaring growth of the Sipp market remains incongruous with the rise in Sipp complaints regarding due diligence.
According to the 2017/18 annual review by the Financial Ombudsman Service (FOS), there were 2,051 new complaints made about Sipps. The figure represents a 37 percent rise compared to the previous year.
The complaints mostly concern due diligence failings and mis-selling of Sipps. On the poor advice of unregulated firms, customers have been advised to invest in high-risk, inappropriate funds.
However, the market may be on the verge of undergoing a tighter regulatory regime. New capital adequacy requirements in 2016 stated that Sipp providers must hold higher capital reserves when a greater amount of their Sipps are invested in high-risk, non-standard assets.
Danielle Cripps, a financial analyst at GlobalData, said: “Tighter regulation is likely to impact how providers and advisers operate in the market.
“Despite this, the market is forecast to remain strong in size and expand as the ageing population seeks to consolidate their pensions and take advantage of the freedoms.”
Despite the insurgence of complaints, the Financial Conduct Authority (FCA) has ruled out the possibility of banning unregulated or non-standard investments from inclusion in Sipps.
If you think you may have been mis-sold a Sipp, please contact one of our expert solicitors who can evaluate whether you have a claim.