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SIPPs - UK - December 2016

Published By :

Mintel

Published Date : Jan 2017

Category :

Banking

No. of Pages : N/A

The SIPP market is increasingly diverging into two separate areas: lower-cost and lower-value platform SIPPs and full-range bespoke SIPPs. Despite the many challenges ahead, there is a place for both plan types. Bespoke providers will have to hold greater levels of capital, and yet more of them may be forced out of the market. But those who remain and employ stringent due diligence processes should be stronger as a result, contributing to a leaner and fitter marketplace.

Table of Content

Overview

What you need to know
Products covered in this Report

Executive Summary

The market
Total SIPP assets are now worth £183 billion
Figure 1: Proportional distribution of volume and value of SIPPs in force, by sector, as August 2016
Annual sales are predicted to rise to over 1 million by 2021
Figure 2: Forecast of the volume of regulated SIPP sales – Fan chart, 2011-21
Distribution mix
Various factors driving demand…
but there are many market pressures too
Companies and brands
Top five SIPP providers
Figure 3: Estimated market share of the largest five SIPP providers, by AUA, 2016
Market contraction continues
Providers increase technology investment
The consumer
Around 3% of UK adults have a SIPP
A small proportion of SIPP investors hold non-standard assets
Figure 4: Investments held within SIPP, September 2016
Fund switching and transfer activity
Figure 5: Recent activity relating to SIPP investment strategy, transfers and switching, September 2016
Recent decumulation activity
Figure 6: Recent activity relating to SIPP decumulation, September 2016
Recent changes to contribution levels
Figure 7: SIPP contribution levels over the past year, September 2016
18% expect to increase their SIPP contributions over the coming year
Figure 8: Expected SIPP contribution levels over the coming year, September 2016
Fund monitoring frequency
Figure 9: SIPP account monitoring frequency, September 2016
Preferred channel to access account
Figure 10: Preferred channel to access SIPP account, September 2016
Decumulation timeframe
Figure 11: Length of time planning for SIPP fund to last, September 2016
SIPP investor strategies
Figure 12: Approaches to SIPP investing and decision-making, September 2016
What we think

Issues and Insights

Good prospects for future growth, but still many challenges ahead
The facts
The implications
Opportunities abound in the decumulation market
The facts
The implications

The Market – What You Need to Know

There are 1.7 million SIPPs in force
Volume sales rise 6% in 2016
Distribution mix
Various factors driving demand…
but there are a number key challenges too

Market Size and Forecast

SIPP assets rise to over £180 billion
Figure 13: Volume and value of SIPPs in force, as at August 2015 vs August 2016
A diverging market
New SIPP sales rebound in 2016
Figure 14: Number of regulated SIPP sales, 2011-16
Market forecast
Solid growth prospects
Figure 15: Forecast of the volume of regulated SIPP sales – Fan chart, 2011-21
Figure 16: Forecast of new SIPP business, at current prices, 2011-21
Forecast methodology

Channels to Market

A significant minority of SIPP sales come via direct channels…
but most new business is generated by intermediaries
Figure 17: Proportion of FCA-regulated SIPP sales, by firm type, Year to June 2016

Market Drivers

Pension freedoms boost attractiveness of SIPPs
Workplace auto-enrolment creates opportunities for future decumulation business
Low interest-rate climate favours equity investment

Regulatory and Legislative Changes

New CapAd rules come into force
Providers up their fees or introduce new ones to reflect the added cost of compliance
Difficulties with identifying and valuing non-standard assets
Some providers disclose margins on retained interest ahead of April-2017 deadline
Providers cease to accept in specie contributions
New Lifetime ISA is unlikely to pose much of a threat to SIPPs
Cuts to pension tax relief will impact some higher-value SIPP funds

Companies and Brands – What You Need to Know

The largest operators
Market continues to contract
Slowdown in new product launches, as providers invest more in technology

Market Share

Standard Life is the largest SIPP provider by AUA…
but Hargreaves Lansdown has the greatest number of SIPP accounts
Curtis Banks consolidates its place in the top five with the acquisition of Suffolk Life
James Hay and Mattioli Woods also make key acquisitions
Figure 18: Estimated market share of the largest five SIPP providers, by AUA, 2016
Fall in number of providers as market pressures intensify
Figure 19: Number of regulated SIPP providers and percentage of total sales, by top five providers in each quarter, Q1 2008-Q2 2016

Competitive Strategies

Investment in platform technology
Hornbuckle name change signifies expansion drive…
as parent, Embark shifts focus onto the platform sector
James Hay aims to diversify and become a full-service platform
Industry developments
New product launches
AXA sells its wrap platform and closes Family SIPP
Continued growth in third-party administration

The Consumer – What You Need to Know

Around 3% of UK adults have a SIPP
Only a minority hold non-standard assets
Pension transfers are common
20% of over-55s have drawn cash from their SIPP over the past year
Majority take active approach to monitoring SIPP
SIPP holders looking to the long-term
31% employ a passive investment strategy

SIPP Asset Mix

Proportion of SIPP investors holding cash is roughly the same as a year ago…
as rates on SIPP deposits fall…
although there is a marked increase in the proportion holding NS&I products
Figure 20: Investments held within SIPP, August 2015 and September 2016
6% hold unlisted shares

Investment, Transfer & Switching Activity

Switching funds is fairly common
14% have applied to protect their lifetime allowance within the past year
Figure 21: Recent activity relating to SIPP investment strategy, transfers and switching, September 2016
Transfers in outnumber transfers out
20% say they are considering changing SIPP providers within the next 12 months…
Figure 22: Expected future activity relating to SIPP investment strategy, transfers and switching, September 2016
but this may not be practical or straightforward for all
21% of SIPP investors expect to transfer in funds

Decumulation Activity by the Over-55s

20% of SIPP investors have withdrawn money from their SIPP over the past year…
Figure 23: Recent activity relating to SIPP decumulation, September 2016
while 22% expect to do so over the next 12 months
Figure 24: Expected future activity relating to SIPP decumulation, September 2016
Drawdown will also remain popular

Changes in Contribution Level

More SIPP investors have upped their contributions than decreased them in the past year
Figure 25: SIPP contribution levels over the past year, September 2016
Around half expect to maintain their contributions at the current level over the next 12 months
Figure 26: Expected SIPP contribution levels over the coming year, September 2016

SIPP Monitoring & Account Access

One in five SIPP investors monitor performance at least once a week
Figure 27: SIPP account monitoring frequency, September 2016
71% prefer to access their SIPP online or via a mobile app
Figure 28: Channel used to access SIPP account, September 2016
Figure 29: Preferred channel to access SIPP account, September 2016
Those who prefer to access their account online record a higher monitoring frequency rate
Figure 30: SIPP account monitoring frequency, by preferred channel to access SIPP account, September 2016

SIPP Decumulation Timeframe

29% of SIPP investors want their accumulated fund to last them their whole lifetime…
while 12% want to pass at least some of it on to family
27% have much shorter decumulation timeframes
Figure 31: Length of time planning SIPP fund to last, September 2016

Investment Strategies

37% of respondents are investing in a capital growth strategy…
while 11% are seeking both growth and income
Figure 32: Approaches to SIPP investing and decision-making, September 2016
27% delegate investment decision-making to an adviser
31% employ a passive investment strategy

Appendix – Data Sources and Abbreviations

Data sources
Consumer research methodology
Abbreviations

Appendix – Market Size and Forecast

Total market sales forecast – Best- and worst-case scenarios
Figure 33: Forecast of regulated SIPP sales – Best- and worst-case scenarios, 2016-21
Forecast methodology

List of Table

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