Sipps’ popularity on the up

THE PROFILE of group self-invested personal pensions (Sipps) appears to be on the rise among employers. In the past few months, well-known companies such as Kingfisher (owner of B&Q), GlaxoSmithKline (GSK), Stagecoach, Willis Group Holdings and Coda have added the perk to their benefits package.

Sipps are increasing in popularity according to Hargreaves Lansdown data, which shows that total sales (including those for individuals) are up by more than 53% for the 2007/08 tax year compared to the preceding 12 months.

Emma Skedgel, senior consultant at actuarial firm Punter Southall, believes that the popularity of Sipps is partly due to the rules around occupational and personal pensions becoming more straightforward and transparent following A-Day in 2006.

Another factor is that the sale of group Sipps is now regulated, the Financial Services Authority (FSA) having taken on responsibility for them in April 2007. Chris McWilliam, senior consultant at Aon Consulting, says that this has provided reassurance for employers that have been considering offering group Sipps to staff.

Employers are also beginning to appreciate that group Sipps enable staff who have participated in maturing employee share schemes to continue to hold their shares in a tax-efficient environment. Martin Ralph, pension and retirement benefits director at Willis Employee Benefits, who was involved in introducing a group Sipp at his parent company in March, said: “Willis is a public company and lots of employees participate within the share arrangement. The Sipp is a means of encouraging employees to invest in the business and hold their shares in a tax-efficient environment.”

Skedgel believes that where Sipps are provided to employees they should be well communicated, so that everyone fully understands them. Sipps are designed for people who are financially savvy and interested in actively investing their money and, therefore, they may not suit all employees. Aon’s McWilliam said: “Some companies don’t want them if only a minority of staff are willing to take part.”

However, employers could do as Kingfisher has done and limit Sipp membership to company executives and managers. They can then also run a separate pension scheme for all staff. Due to this limited appeal, Ralph believes growth will fade. “The trend will slow down. [Statistically] there has been a sizable growth in the last year, [but] the growth is from a relatively small number to begin with,” he said.

Just as more employers could be expected to follow GSK’s lead by introducing a group Sipp, the credit crunch may give them reason to pause. But one fact is sure, group Sipps are now an established way for employers to offer financially-astute employees something extra.