The changes in the rules affecting residential property as an investment will result in a reduction in the amount of self invested personal pension (Sipp) business according to new research published today.
The IFA Census, conducted by NMG research in conjunction with the Association of Independent Financial Advisers (Aifa), reveals 60% of IFAs believe they will see a reduction in the amount of Sipp business they would otherwise have written. Within this number 29% feel the rule changes will “significantly reduce” the amount of Sipp business they write, while 31% feel the will “slightly reduce” their prospective business.
However in the study, carried out just days after the pre-Budget announcement, the changes affecting other more esoteric assets, such as fine wines and vintage cars, seem likely to have less impact, with 80% of the 255 IFAs questioned, stating the changes would have no effect on their Sipp business plans.
David Burns, director of NMG Research, says: “These results are the first indication of the potential impact of the changes announced by the Chancellor on the Sipp industry. When we conducted research into Sipps in May 2005, 85% of IFAs said that they expected an increase in the amount of Sipps business they write post-A-day. Whilst we still expect to see steady growth in Sipps, it looks like many IFAs are re-thinking the scale of the Sipp opportunity.”
Mike Morrison, pensions strategy manager at Winterthur Life, says it is likely there will be a reduction in the amount of Sipp business now that the rules have changed.
He says: “I agree there is going to be a reduction in Sipps business and pensions as although people will continue to invest in them for the right reasons, there are many people who were planning to use Sipps to invest in property or to put money in to buy a property. Whether they will continue to do this outside of pensions is another matter.”
Alasdair Buchanan agrees that it seems a realistic estimate although its difficult to tell if the other 40% are not affected at all, or whether they think it will have an impact on the industry but not on them personally as they might not have been planning on an increase in Sipp business or that it was unlikely to include residential property.
He adds: “It was an interesting subject that got people engaged, as property appeals to a large extent of the population, even though the majority of IFAs recognised that there wasn’t going to be a mass market for this. One of the ironies is that the proportion of individuals affected by the pre-budget statement isn’t all that great but that it does have a disproportionate affect on the perception and attitude of the market.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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