Group Sipps to remain ‘niche’ solution for key personnel

The report says because the breadth of investment solutions offered by group Sipps are only of relevance to a small proportion of staff, schemes will generally only be run in tandem with group stakeholders or GPPs.

The report, which analyses trends in the group pensions market, says there has been little innovation at the lower end of the market where, threatened by the advent of Personal Accounts, providers have battled against tight margins to offer fixed cost group stakeholder products with more limited fund choice. These have needed to integrate more online and technological service solutions to remain cost effective.

Predicting that the shift to defined contribution will continue, the report says the discussion around the number of funds or asset types available in the group arena is often a futile one because the majority of members pick defaults however many options there are.

Because of this the research company is predicting that default funds may experience further tweaking to fit specific client models while multi-manager fund propositions will be pushed as viable investment solutions through group personal pension products.

For those employers who wish to completely outsource investment decision making, group Sipps may come back into play as their flexible structure can facilitate the appointment of a discretionary fund manager to run scheme portfolios, says Defaqto.

Matt Ward, principal consultant for pensions and wealth management at Defaqto says: “Group Sipp is being touted by some to be the new heir to the throne in the group pension market, but Defaqto believes that due to its array of investment solutions it is more likely to suit the needs of a small percentage of the workforce such as key personnel and directors. As such it may very well emerge as a successful top-up scheme solution which can be run in tandem with a Group Stakeholder or GPP scheme.

“For those opting for a Group Sipp proposition the market is opened up to include niche and specialist providers of such schemes who often major on personal service capability.”

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