In this month’s blog for Investment Sense, Jeff Steedman, Head of SIPP & SSAS Business Development at Xafinity outlines the key differences between SSAS (Small Self-Administered Scheme) & SIPP (Self-Invested Personal Pension) and what market trends they are seeing in today’s self invested pension market.
Emerging trends in 2014 in the SSAS & SIPP world
SIPP & DFM (Discretionary Fund Manager) There are many advisers who are deciding against “fund picking” and this is leading to an ever increasing use of DFMs. The low cost “simple SIPP” structure offers the perfect wrapper to outsource the investment responsibility to the DFM, but keeping the pension under their advice.
SIPP & pension consolidation This is not as much of an emerging trend, but one that is likely to remain prominent in the SIPP market for many years. Many clients move job five or more times in their career and with Auto Enrolment firmly underway, this is likely to offer more pension consolidation opportunities
Commercial property & land of all shapes and sizes Whilst the ‘simple’ SIPP has its place, the ‘full SIPP’ remains a critical product for clients with more sophisticated needs. We continue to see innovative clients embarking on new ventures, using their pension funds to support them achieve their goals, for example:
- the purchase of “Eco Camp Sites”
- night clubs which have been purchased and re-opened
- traditional SIPP & SSAS purchases of haulage yards, industrial units, and factories
Joining forces At Xafinity, 67% of our SSAS have more than one member where are assets are then pooled and a massive 40% of our full Xafinity SIPPs have two or more members invested in the same asset, mostly property.
SSAS investment As well as commercial property investments, we have seen other assets being used as 1st charge security including plant & machinery, artwork, as well as commercial and residential property.
Fit & Proper person test We expect the forthcoming “fit and proper persons test” (being introduced in 2014) to impact “orphan” SSAS i.e. those who don’t retain the services of a professional SSAS provider. Clearly some are trying to run their pension schemes themselves and this evidently won’t be good enough in future.
SSAS versus SIPP – the history books
SSAS dominated the “self invested” pensions market in the 1980s and 1990s until its younger cousin, the SIPP, came to the fore in the mid 1990s. The SIPP’s ability to attract the self employed, partnerships as well as being available to directors and key employees of limited companies has meant that it dominates the market today.
In 2014 the SIPP has evolved into a widely used product for all types of clients, from those just starting out in pensions savings, to the high-net-worth / sophisticated end of the market where millions of pounds are held in individual SIPPs.
SSAS remains available and absolutely the right product for many clients, albeit there are perhaps only 10 proper professional providers. It’s to one of these that advisers with no experience should gravitate, to be properly supported in understanding the product and its implementation in certain client circumstances.
SSAS versus SIPP – the main differences
To start, let’s remind ourselves of what “common parts” SIPP & SSAS have:
- Ability to accept “transfers” from other pension schemes
- Contribution limits/rules
- Capped & flexible drawdown rules / limits
- Death benefit rules/limits
- Investments including land, commercial property, listed & unlisted shares, FCA approved investments, products, bank deposits and Unregulated Collective Investment Schemes
- Borrowing limits
- Pension scheme bank account is set up to co-ordinate all financial transactions
The main differences
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Why use Xafinity?
Great products, properly supported by professionals, in a company with more than 30 years in this field. But it’s our personal service that stands us out from the crowd.
We have a dedicated support structure designed to ensure you and your clients receive a first class experience from first contact to ongoing administrative support.
Feel free to call me, Jeff Steedman (07989 627767), or Simon Perry (South West) 07436 75970 Matt Storey on 01786 237017 for a quick ‘tech chat’ about the various property scenarios that come across your desk
About the author
The all-important small print
Investment in property is a long term one and at times, markets may prove to be illiquid. It may not therefore be possible to realise an investment at a time of your choosing and any forced sale could produce returns that are considerably below market valuations.