SIPPs in danger of being used unnecessarily

This highlights the concern that SIPPs may be being used unnecessarily, and a platform pension may be a suitable alternative, helping people meet their retirement needs in a more cost effective way.

The survey also revealed that 70% of investors who have a SIPP do not use it to invest in ETFs, 60% do not use it to invest in investment trusts, and nearly half (45%) do not use it to invest in direct equities.

The charging structure of a SIPP is generally more expensive than a platform pension - for limited additional benefit.  If wider investment choice is not utilised, then it is not necessarily in the best interests of the customer to use the more expensive product wrapper.

If the vast majority of a customer's SIPP investments are held in Unit Trust or OEIC then this raises the question as to whether a personal pension on a platform would have been a better, more cost effective, alternative.

This is supported by further research from Skandia which shows that nearly half (46%) of advisers believe that just one in ten or less of their customers would be better off with a SIPP rather than a personal pension.

This would indicate that SIPPs remain a niche investment vehicle and are better suited to individuals with bespoke investment needs.

Nick Dixon, marketing director at Skandia comments:

"Since the introduction of SIPPs their popularity has grown significantly and are sometimes positioned as the only pension worth having.

"This is not in the best interests of the majority of people and there is a danger that many SIPP customers are in the wrong product.

"Whilst a SIPP can offer a wide investment choice and flexibility, our research suggests that many investors aren't fully utilising the investment flexibility that SIPPs offer and would instead be better off with a platform pension.

"As platform pensions continue to evolve - with the range of assets available and income flexibility increasing - we would expect platform pensions to increasingly replace the need for SIPPs."