The big attraction of self-invested personal pension plans (Sipps) over other types of contract-based defined contribution (DC) plans is they can invest in a broader range of assets, including shares and commercial property. Historically, this made Sipps largely the preserve of equity partners in small firms looking to club together to buy their business premises. In recent years, however, Sipps have been implemented in FTSE 100 companies, such as BT and GlaxoSmithKline, to cover the entire workforce, and their popularity is growing.
Most second-generation workplace Sipps have a two-tier structure, with a limited fund choice for most staff and a self-investment option for senior managers and directors. Ann Flynn, head of customer management at Standard Life, says: “In most cases, the true self-invested service is targeted at the senior layer of the workforce. Perhaps 90% of schemes are arranged on a segmented basis.”
Such structures have become possible because Sipp charges have fallen sharply, so members who do not use the greater investment freedoms are charged no more than if it was a group personal pension (GPP). “The basic Sipp offering is very similar to a GPP and priced on the same basis,” says Flynn. “It is only when the member moves into self-investing that there is any additional cost. Financial advisors can help you look at your options.
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