FTAdviser.com

Advertising

This development, which is expected to announce tomorrow (Friday 27 June), could be a "potentially catastrophic" development for some product providers that do not provide Sipps, according to Tom McPhail, head of pensions research at Hargreaves Lansdown.

He added this would be one of the most significant developments in the IFA, insurance and investment adviser industry in recent history.

McPhail said: "We have had thousands of clients who are interested in moving their protected rights into Sipps. We know that there is about £100bn of protected rights money which the insurance companies have a monopoly on, it makes up to 25 per cent of insurance companies personal pension books, this is a big deal for investors and intermediaries, but also insurance companies too.

"For example, Standard Life is becoming more and more a Sipp provider – and it said that Sipps were a significant source of new business for them, which means it may want to recycle some of its personal pensions into Sipps.

"However, this development could be a potential threat for insurance companies, not from Standard Life's point of view, but there are some insurance companies that have a big book of personal pensions but no Sipp offering.

However, he added: "From the point of view of an investor, IFA and some product providers this is potentially a very positive development. For some product providers this is potentially catastrophic."

Axa offers a Sipp, and head of pensions and savings policy Steve Folkard said he did not think it would adversary affect the insurance sector and tidies up the "administrative mess".

Folkard concluded: "Traditionally if someone has chosen to invest in a Sipp and they had protected rights, what they have done up until now is left their protected rights separate from their Sipps.

"It is rare that someone looking to undertake self investments has a significant amount in funds under management in the protected rights portion, it is recognising that it is administratively convenient for people to take those funds with them.

"Most people, who have protected rights and Sipps, have left the protected rights in a stand alone contract. The new flexibility is tidying up what was once an administrative mess.

"I do not think this is bad or awkward for companies that do not provide Sipps because there are a large number of people that have protected rights where Sipps are not appropriate for them."