Altus swift seminar final 151112


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A short presentation on the UK SIPP market, current issues and future prospects with data

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Altus swift seminar final 151112

  1. 1. SIPPs and transfers – the pot thickens John Moret Altus/Swift Seminar 15th November 2012
  2. 2. The pot thickens Today’s ingredients •The SIPP market today •The SIPP regulatory tsunami •Can SIPP operators survive? •The conversion of Paul •Where next for the SIPP market? Altus/Swift seminar Nov 2012
  3. 3. The SIPP market today Solely platform Non bespoke including Bespoke – offering wider SIPPs platform SIPPs(up to Oct 11) investment choice1,200,000 15 Providers 34 Providers 72 Providers1,000,000 The 10 largest Average growth 800,000 providers account for since A-day £29bn almost 80% of SIPPs +28.5%pa 600,000 (70% of assets) £27bn 400,000 200,000 +14%pa £57bn 0 May Oct Jan Jan Jan Jan Sep Sep Oct Oct Jan Feb Jan Feb Jan Oct Oct 96 97 99 00 01 02 03 04 05 06 07 08 09 10 11 11 12 Left hand axis shows number of SIPPs – at 1/10/2012 estimated 978,000 Right hand axis shows total assets –at 1/10/2012 estimated £113bn FSA data from CP12/29 states 110 providers took on SIPP business between Jan-Jun 2012 Also approx 200,000 new SIPPs sold “annually” Source: MoretoSipps research Estimates derived from trade magazine surveys and industry data Altus/Swift seminar Nov 2012
  4. 4. The top ten SIPP providers by assets at Nov 2012Source: MoretoSIPPs research and trade mag surveys Total SIPP Number of Ave SIPP case assets SIPPs size Standard Life £18.0bn 147,000 £122,000 James Hay £13.8bn 37,600 £367,000 A J Bell Group £11.5bn 64,000 £180,000 Aegon £10.5bn 260,000 £40,000 Hargreaves Lansdown £8.3bn 140,000 £59,000 Suffolk Life £4.3bn 12,800 £335,000 Transact £4.2bn 40,100 £104,000 Hornbuckle Mitchell £4.1bn 15,000 £273,000 Curtis Banks £3.4bn 10,000 £340,000 Scottish Widows £2.5bn 32,200 £78,000 Altus/Swift seminar Nov 2012
  5. 5. SIPP market growth 2005-2012Shows estimated number of SIPPs split between “advised” and “non-advised”Non-advised – where investor takes all the decisionsAdvised – where SIPP is arranged via an adviser 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Oct 05 Oct 12 Number of SIPPsSource: MoretoSipps researchEstimates derived from trade magazine surveys and industry data Altus/Swift seminar Nov 2012
  6. 6. Where are SIPPs invested?(estimates derived from trade mag surveys by MoretoSIPPs) Altus/Swift seminar Nov 2012
  7. 7. The SIPP regulatory tsunamiMarch 2006 SIPP regulatory framework announcedApril 2006 Pensions simplificationApril 2007 SIPP regulation introducedOct 2008 SIPPs able to hold protected rightsDec 2008 Thematic review of transfer/switching “advice”Sept 2009 First thematic review of SIPP operatorsApril 2010 Update on review of pension transfer/switching adviceJan 2011 FSCS levyJan/Mar 2011 CP11/01 & CP11/03April 2011 New drawdown regimes introducedApril 2011 Changes to pensions tax relief (AAC & LTA)Aug 2012 UCIS marketingOct 2012 GC 12/12 Second thematic review of SIPP operators Nov 2012CP12/29 SIPP disclosure regime confirmed effective April 2013Late 2012 SIPP operator capital requirements Altus/Swift seminar
  8. 8. Key points from second thematic review ofSIPP operators (GC 12/12) “We believe that, when taken as a whole, the SIPP operator sector has the potential to cause significant consumer detriment. Accordingly, a programme of co-ordinated work is planned, with the aim of raising standards across the sector.” (FSA GC 12/12 23 Oct 2012 “SIPP Thematic Review Findings and Guidance”) Planned Actions: •All SIPP Operators to review business in light of the report •FSA running programme of workshops for SIPP operators •Policy statement (CP12/29) on disclosure •Consultation (CP12/29) on inflation-adjusted projections •Further consultation/guidance on capital requirements Altus/Swift seminar Nov 2012
  9. 9. Key points from second thematic review of SIPP operators (GC 12/12) FSA’s conclusions: • Senior management have poor understanding of regulatory requirements and lack of oversight • Poor corporate governance – conduits to financial crime • Poor quality MI leading to inadequate risk mitigation planning • Increase in number & poor monitoring of “non-standard investments” • Holding insufficient capital • Lack of evidence of due diligence on introducers & investments • Poor understanding of the application of Client Money & Assets rules (CASS) • Evidence of conflicts of interest My conclusions: • FSA’s conclusions based on small sample of smaller operators • The application of CASS rules can be difficult – particularly given the variety of SIPP legal structures • Many managers in smaller SIPP operators are “regulation raw” • The levels of technology support are inadequate • The framework for SIPP regulation was ill-conceived & has been poorly maintained Altus/Swift seminar Nov 2012
  10. 10. How do you make money from SIPPs as a provider? Type of Income Source of IncomeAdministration fee income Set up fees, annual fees, transfer in fees, withdrawal fees, exit feesInvestment trading & related income Transaction/dealing activityInterest “turn” Bank accounts*Other income e.g. commissions Rebates from fund managers, insurance commissions, etc.Investment advice Discretionary managementSpecialist fees Property management etc.*Less than 20% of SIPP providers currently pay base rate or higher Source: Money Management SIPP survey (Oct 2012) Altus/Swift seminar Nov 2012
  11. 11. The top ten SIPP providers–interest paid on cash depositsSource: Money Management survey Oct 2012 Total SIPP assets Interest paid Annual cost of on cash alternative deposits bank account Standard Life £18.0bn 0.3% 0-£446* James Hay £13.8bn 0.1% 0 A J Bell Group £11.5bn 0% £120* Aegon £10.5bn 0% - Hargreaves Lansdown £8.3bn 0-0.25% Fixed term only Suffolk Life £4.3bn 0-0.25% n/a Transact £4.2bn 1.03% - Hornbuckle Mitchell £4.1bn 0.1-0.15% £30 Curtis Banks £3.4bn 0.1-0.2% £50 Scottish Widows £2.5bn ? n/d Altus/Swift seminar Nov 2012
  12. 12. The importance of retained interestSource: MoretoSIPPs research Company size Estimated value of retained interest as % of revenues Company A Large 35% Company B Mid 30% Company C Small 10% Company D Mid >20% Company E Large >40% Company F Small 20% These estimates have been derived from data/research by MoretoSIPPs. In all but one case the data relates to revenues in the last 3 years. Companies have been categorised by total annual revenue from SIPP operations: Large > £25million p.a.; Mid £5-£25million p.a.; Small < £5million p.a. Altus/Swift seminar Nov 2012
  13. 13. “The conversion of Paul”Money Marketing 14th Sept 2006 “As a client said to me after 3 years of regular meetings and 12 valuations from his consolidated SIPP fund: “For the first time in my adult life, I now know what is going on in my pension fund.”” (Nick Bamford – Money Marketing 14th Sept 2006)The advantages of consolidation under a SIPP wrapper:•Information flow•Choice•Control•Planning “But do not let us fall into the trap of the ill-informed commentator and focus solely on price. Let us do what sensible people do and focus on value for money.” (Nick Bamford – Money Marketing 14th Sept 2006) Altus/Swift seminar Nov 2012
  14. 14. The top ten SIPP providers by assets at Nov 2012Source: MoretoSIPPs research and trade mag surveys Total Number Ave SIPP % of business with SIPP of SIPPs case size transfers assets Standard Life £18.0bn 147,000 £122,000 70 James Hay £13.8bn 37,600 £367,000 76 A J Bell Group £11.5bn 64,000 £180,000 70 Aegon £10.5bn 260,000 £40,000 n/d Hargreaves Lansdown £8.3bn 140,000 £59,000 65 (in last 12 months) Suffolk Life £4.3bn 12,800 £335,000 94 Transact £4.2bn 40,100 £104,000 65 Hornbuckle Mitchell £4.1bn 15,000 £273,000 80 Curtis Banks £3.4bn 10,000 £340,000 80 Scottish Widows £2.5bn 32,200 £78,000 n/d Altus/Swift seminar Nov 2012
  15. 15. SIPP transfers –some basic facts Main sources: • PP/RAC/EPP to SIPP • SSAS to SIPP • Workplace DC to SIPP • SIPP to SIPP/platform to platform • Workplace DB to SIPP Main types • In cash – est. 85% • In specie – est. 15%  Timescales – days/weeks/months/years  Complications with drawdown transfers  No standard process model and many legal structures  Multiple parties involved  Lack of service standards  Range of underlying investments Altus/Swift seminar Nov 2012
  16. 16. Ease of reregistration/re-assignment(asset estimates derived from trade mag surveys by MoretoSIPPs) Altus/Swift seminar Nov 2012
  17. 17. SIPP transfersFactors that may drive change Cost reductions –common standards/declarations Reduced risk through increased automation Regulatory pressure More transparent service levels and other KPIs Influence of other initiatives • Platform reregistration • Non-SIPP pension transfer initiatives • DWP developments Technology enhancements e.g. central tracking systems, data interchange Consolidation of providers Altus/Swift seminar Nov 2012
  18. 18. A wall of money still to play forInsured workplace £500bnInsured individual £450bnSelf administered £1,100bnoccupational Altus/Swift seminar Nov 2012
  19. 19. Where next for the SIPP market? Historic rates of growth in the SIPP market are unsustainable Platforms will have an increasingly important role in shaping the SIPP market The bespoke SIPP market is nearly exhausted The true DIY SIPP will grow in popularity SIPPs as a consolidation vehicle will survive – particularly in the decumulation market Improved transfer processing is crucial There has to be consolidation amongst SIPP providers Longer term we may see: • changes to pensions tax reliefs • changes to SIPP regulation • the influence of A/E & NEST• There’s a lot going on!!! Altus/Swift seminar Nov 2012
  20. 20. For more informationT 01794 324 608 / M 0771 492