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Sipp Spotlight: Scottish Widows in focus

We examine the Scottish Widows Sipp, a low-cost product that avoids esoteric assets.

Business information

Number of Sipps 55,958

Total Sipp assets £4.2 billion

Average size of individual Sipp £77,000

Profit for latest financial year for which figures are available (31 December 2011): £282 million

Turnover for latest financial year for which figures are available (31 December 2011): £5.4 billion

Capital held in excess of regulatory requirement:

Our life and pensions group had free capital of £4.3 billion at the end of 2010.

Who are the owners of the business?

Scottish Widows (subsidiary of Lloyds Banking Group)

Available investments

Fund range

136 internally and externally managed insured funds and access to 1,400 Oeics, unit trusts and Sicavs available through Fidelity FundsNetwork fund supermarket.

• Scottish Widows pension funds (both internally and externally managed)

• Governed investment strategies

• External unit trusts, Oeics and Sicavs via a fund supermarket

• Fixed-term cash deposits

• A panel of seven discretionary fund managers (DFMs)

• Share dealing

• Commercial property (not property partnerships)

• Exchange traded funds

• Gilts (via share dealing and DFMs)

• Investment trusts via share dealing

Esoteric assets

Customers cannot invest in esoteric investments, such as forestry or wind farms, through the retirement account.

Charges

Minimum contributions:

£200 monthly

£2,400 annual

£10,000 single

£10,000 transfer

An annual service charge is taken as a percentage of the total value of all the assets on a sliding scale from 0.6% for assets below £20,000 to 0.1% for assets above £2 million.

Investment charges

Investments (both share purchase and disposal) in share dealing through the Stocktrade service are subject to the following fees:

Stocktrade [execution-only] Commission: 0.3% of the investment’s value, subject to a minimum charge of £15 and a maximum charge of £75

Stamp Duty: 0.5% of the value (for UK share purchases)

Panel on takeovers and merger levy: £1 for UK share transactions over £10,000

Property

Annual property management charge:

A percentage of the property’s value on a sliding scale from 1.25% for properties under £100,000 to 0.1% for values of £750,000 and above.

Other features

Group Sipp No

Scheme pension No

Capped drawdown, phased drawdown : Capped and phased drawdown until age 75. Capped drawdown post-75 will be introduced in the second half of 2013.

Flexible drawdown No

Phased retirement Yes

Platform links

Not linked to a platform. Access to unit trusts, Oeics and Sicavs through Fidelity FundsNetwork. No charges apply for access to the fund supermarket.

Adviser view

Philip Pearson

IFA, P&P Invest

The Scottish Widows Sipp is closer to a personal pension than a Sipp. It is perfect for the retail distribution review landscape because it provides a platform to construct portfolios for clients using all available funds in the marketplace.

It is a cost-effective way to invest without the complexity and trustee charges of a bespoke Sipp. That means it is cost-effective for clients with £150,000 and above. Below that figure there are cheaper alternatives, which are less sophisticated.

A true Sipp is defined as a pension with an individual trustee and provides the means for third-party investment, everything else is a personal pension labelled as a Sipp.

For example, a true Sipp is what you would use for commercial property investments, but that’s not the mainstream choice for most people.

The suitability of pensions depends on a client’s attitude to risk, but I would say the retirement account is suited to assets up to the £1 million mark.

I have 60 clients in the Sipp, representing about £60 million of assets.

The charges are very low. For a £50,000 plan, the charges start at 0.35% and decrease as pension increases in value. This product costs only slightly more than a stakeholder pension.