A third of advisers say non-standard assets play key role in SIPPs

Nearly a third of advisers say non-standard assets are a key component of SIPPs despite ongoing caution over high-risk investments in the wake of recent court cases.

A CoreData Research study of 250 UK advisers found 29 per cent think non-standard investments have an important role to play in SIPPs. This proportion increases to 36 per cent of advisers focused on mass-affluent clients and four in 10 (39 per cent) younger advisers with up to 10 years industry experience.

Furthermore, some advisers think regulations aimed at SIPP providers holding non-standard assets have been detrimental. About three in 10 (28 per cent) say SIPP capital adequacy rules have restricted investment choice and a fifth (21 per cent) think the rules should be updated to make it easier for investors to purchase non-standard investments. A higher proportion of mass-affluent advisers (27 per cent) want the rules updated.

While advisers continue to worry about high-risk investments, concerns have eased slightly from last year. Four in 10 (40 per cent) say SIPP providers should not be allowed to hold non-standard investments — down from 49 per cent last year. And half (56 per cent vs 59 per cent in 2019) say they are more cautious about high-risk SIPP investments in the aftermath of recent court cases.

Meanwhile, charges remain the biggest headache when advising on SIPPs. Six in 10 (62 per cent) advisers say high charges/fees are a main concern, although this is down from last year (75 per cent). But advisers express elevated levels of concern this year about PI coverage (23 per cent vs 15 per cent in 2019), claims management companies (22 per cent vs 15 per cent in 2019) and scams (15 per cent vs 8 per cent in 2019).

“These higher levels of concern likely reflect pressures arising from the Covid-19 crisis,” saisaysd Craig Phillips, head of International, CoreData Research. “Some advisers might be struggling with soaring PI premiums amid the Covid-19 financial fallout, for example, while the crisis has also created new opportunities for pension scammers.”

Elsewhere, unit trusts and OEICs (84 per cent) top the client wish list when it comes to the most popular SIPP investments. Advisers also point to individual shares (40 per cent), cash (33 per cent) and investment trusts (27 per cent) as popular investments.

The relatively high cash proportion suggests investors have adopted a more defensive stance in response to the Covid-19 fuelled-market turbulence. And investment trusts, which can pay dividends from reserves, may hold more appeal for income investors at a time when many open-ended funds are suffering from dividend cancellations or suspensions.