Did you know that the most popular pension transfers since pension freedoms were introduced in 2015 are SIPPS (self-invested personal pensions)? Pension freedoms, introduced by the then Chancellor George Osborne gave people the power to choose how they invest their pension pot, rather than have to use an annuity as before. The fact that many people choose to be transferring their pots into a self-invested personal pension has been some cause for concern for industry professionals as many SIPPS are unadvised, which could lead to some people making poor investment decisions.
However, former Tory pensions minister Baroness Ros Altmann has said that it's "not surprising" self-invested personal pensions becoming more popular and that this is not necessarily a bad thing:
"The SIPP wrapper offers more flexibilities than traditional pensions or annuities, and the whole purpose of freedom and choice is about more flexibility, freedom and choice. Many of the older style products do not allow the new flexibilities."
"Since we don't know how many people are actually getting advice nor what investments they are holding it is difficult to conclude that this is all negative. Buying annuities under the old system was very risky and forced many people into an unsuitable product that could have wasted much of their pension savings. " she said.
Baroness Altmann's optimism is also shared by Labour's former spokesperson on pensions, Gregg McClymont.
"It's important to remember that for the growing army of self-employed people in the UK a SIPP is currently their only pension option outside of state provision." he said.
"It's important to check charges but for some platforms, there is no additional charge for Sipp drawdown in which case a Sipp is a to and through retirement solution."
However, he does warn that too few people are prepared to pay for financial advice:
"This is a larger challenge for making pensions freedoms work – I wouldn't single out Sipps in this respect."
The report on the rise in popularity of self-invested personal pensions was carried out by Fintech firm Origo and reported in FTAdviser.