The survey follows the introduction in April of new legislation resulting from the Finance Bill 2011, which changed some of the rules around tax relief on SIPPs and other wrappers.
Although around three quarters (76%) of IFAs surveyed have seen no change in the volume of SIPP/SSAS business since the new legislation became effective in April 2011, a fifth (20%) of pension focused IFAs have seen an increase in this type of business.
Of those IFAs to have seen an increase in business, almost a third (30%) said that it has increased by more than 20% and one in ten have seen an increase of more than 30%.
Those IFAs surveyed said that their clients have on average almost 10% of their SIPP/SSAS assets held as cash deposits, equating to some £37,800.
However, Investec is warning that many investors are losing out on higher returns because the cash element of their SIPP or SSAS is languishing in a deposit account paying a poor rate of return.
Investec believes that part of the reason for the increased demand in SIPP and SSAS investments is investors’ desire for greater control over their pension investments.
At the same time, more IFAs are using wrap platform technology in order to offer their clients access to a broader range of funds and managers across a range of sectors.
Lionel Ross, Investec Bank commented:
“Investors appear to be looking at SIPP and SSAS wrappers as an effective way to manage their pension investments in a low base rate environment and while equities remain volatile.
"More wrappers are migrating on to the UK wrap platform market, offering an even wider range of assets.
“We now offer cash deposits to six out of the twenty-two platform providers, enabling investors to benefit from more competitive returns on the cash element of their investments.
"Cash continues to play an important role in any SIPP or SSAS portfolio; whether that role is to ride out turbulent markets or achieve greater flexibility but investors ensure their cash is held in an account offering a fair rate of interest.”
Robert Graves, Head of Pensions Technical Services, Rowanmoor Pensions, said:
“The fact that SIPP and SSAS volumes have continued to increase despite recent rule changes is testament to the added value strengths of these products.
"However, part of the success story is that these products are used by those who have already built up pension funds through making tax-advantaged contributions in the past. New generations need incentives, such as the current tax relief available, to save for retirement too.
"Therefore it is not surprising many IFAs expressed concern that reducing tax relief would be detrimental.”
“Investment flexibility, particularly in turbulent investment times, is important. Those who wish to avoid the current volatility witnessed in some markets may seek the relatively safe harbour of cash deposits.
"With this research indicating that an average of 10% of assets in SIPPs and SSASs being held as cash, it is important that IFAs use SIPP and SSAS products that can readily facilitate the use of competitive cash deposit accounts such as those offered by Investec.”
For the current tax year 2011/12 the level of contributions on which personal tax relief is granted is up to 100% of UK earnings (from employment or self employment) subject to an overall limit of £50,000 - the annual allowance.
The new rules have also significantly reduced the annual allowance from £255,000 (2010/11) to £50,000 for the tax year 2011/12, reducing the lifetime allowance from £1.8m to £1.5m.
Other changes include the removal of the previously unpopular requirement to ‘secure’ a pension income from age 75, thus providing potentially increased flexibility in the way pension benefits may be drawn.
