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05 Apr 2017

Ros Altmann: DIY pensions not cause for concern

Despite concerns about the rising popularity of self-invested personal pensions (Sipps), former pensions minister and Labour pensions spokesperson Ros Altmann says this may not be a bad thing, the FT Adviser reports.

According to new research by fintech firm Origo, since the pension reforms were introduced in April 2015, Sipps have become the most popular destination for pensions transfers. This suggests that more people are taking control of their own investment plans, as Sipps are largely unadvised.

But Ros Altmann, who served as pensions minister from 2015 to 2016, said a surge in Sipps uptake was no surprise, and that it wasn´t necessarily cause for concern.

While Altmann recognises that they come with investment risks, this is no different to any defined contribution pensions scheme. What´s more, they have a number of benefits compared with traditional pensions or annuities.

These include more flexibility, freedom and choice, which are not available with older-style pension products. As she explains, “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.”

Gregg McClymont - another former Labour pensions spokesperson, and current head of retirement savings at Aberdeen Asset Management - also stressed the positives of this trend.

“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 noted.

However, he did warn that people contributing to a Sipp instead of using a salary sacrifice scheme could be missing a trick, because tax relief “is given at the source” and “fund costs are often discounted.”

Copyright M2 Bespoke 2017

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