'More choice' for Sipp-sters
Monday, 10 December 2007 12:00
Self invested personal pension schemes (Sipps) status will be extended to more users planning their own pensions.
The Department for Work and Pensions (DWP) issued today a consultation on draft regulations to Sipps that will see them be granted protected rights - and so those contracting out of a state second pension through an appropriate personal pension (APP) can choose to self invest their pension.
Sipps being granted protected rights means APP savers will have the right to invest directly in a number of areas - such as shares and commercial property.
"This proposed change will give people more freedom to choose where they invest their pension savings," minister for pensions reform Mike O'Brien.
"It will remove a restriction on Sipp schemes which is no longer necessary and make it easier to transfer funds between schemes."
Responding to the changes, Andrew Tully, marketing technical manager at Standard Life, said: "These changes are excellent news and will give people greater control of their retirement savings.
"Much of the money currently locked up in protected rights, estimated to be between £75 billion and £100 billion, will make its way into Sipps as people want the flexibility and choice to invest their pension pot where they wish."
Ray Chinn, at Sipps specialist Tomorrow, said: "The proposals will help customers to shape their pension investments in a much more straightforward and cost-effective way without unnecessary restriction over how pension funds can be invested."
He added it would also reduce confusion for savers having to separate investment strategies for non-protected and protected-rights funds.
Currently, APPs are prohibited from becoming a Sipp, but this is now not deemed to be necessary as the pensions schemes are to be regulated by the Financial Services Authority (FSA).
Protected rights cover the cash built up from National Insurance rebates by contracting out of the state second pension - thought to stand between £2 billion and £3 billion a year.
However, current legislation means these funds cannot be invested in Sipps - something the government now aims to change.
The new system is expected to come into force in autumn 2008.
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