The Synaptic Guide to SIPPs

Retirement income: why the scale of your platform’s universe matters

The introduction of pension freedoms in April 2015 created a new market of income-hungry investors eager to take advantage of the increased flexibility available for their retirement savings. For those with a SIPP, the new rules opened up the option to set up income drawdown as a way of receiving regular income in retirement or take cash from their pension pot, either as a one-off lump sum or via a series of smaller lump sums.

Platforms responded quickly to the news of the impending pension changes by reducing charges on platform-based SIPPs and income drawdown products either before, or shortly after, the new rules came into effect last year. Ascentric, for example, took action back in the summer of 2014 to reduce ongoing administration charges for drawdown from £150 to £75, with no additional fees for clients looking to set up more drawdown agreements.

This said, cost should not be an investors’ only consideration when reviewing their options for a SIPP or drawdown product through a platform. One of the most widely acknowledged benefits for SIPP savers, who opt not to buy an annuity, is that they do not lose the flexibility to choose where their pension savings are invested, with the ability to select from a wide variety of investment vehicles. So an important additional consideration to cost for SIPP savers is the scale and variety of investment vehicles available through the platform they choose.

Investment strategies have evolved since the introduction of the pension changes, adapting to the increased flexibility available to clients while still supporting their income and capital preservation requirements. The traditional trajectory for pension savings, for example, would usually involve a steady shift from equity based investments to less risky assets during the 10 years leading up to retirement, principally investing in corporate debt, government bonds and cash. However, with the increasing popularity of drawdown has prompted a change in investment strategy. Instead of savers de-risking their pension portfolio, under drawdown, it may be beneficial to prolong their exposure to riskier assets such as equity funds, therefore maintaining the opportunity for both income and capital growth. Alternative investments such as Exchange Traded Funds (ETFs), some of which target income through indices that focus on dividend paying shares, may be suitable for those looking to produce income in retirement too. Property funds also have the potential to pay an attractive income.

The world of pensions is clearly changing the hunting ground for income, arguably making it more important than ever for an adviser to consider whether a platform provides a broad enough investment range beyond the more traditional investment options. With unbiased and unrestricted access to over 3,000 funds and 667 ETFs alongside investment trusts, bonds, gilts, shares and cash, Ascentric’s universe of investments and tax wrappers is one of the widest available in the current platform market.

For professional adviser use only. 

The risks of the SIPP will depend on the investments chosen.

Ascentric is a trading name of Investment Funds Direct Limited (IFDL), which is part of the Royal London Group and authorised and regulated by the Financial Conduct Authority No. 114432. Registered in England and Wales number 1610781, VAT number 368524427.