Welcome to Curtis Banks PLC. This is the first of a series of regular Newsletters keeping you up to date with developments in the SIPP and SSAS market.

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1 State of the Market

Curtis Banks are a new company in the SIPP and SSAS market, but as individuals we have many years’ past experience in this area. As part of the development of our new business, we took a good look around us at the current market place and here are a few of the conclusions we came up with:

• The market place for SIPP providers is pretty crowded, with new entrants joining all the time. No surprises there, given the success of SIPPs, but what does surprise us is the concentration at the top end of the market.

  SIPPs now cover a wide spectrum of the pensions market, from basic low cost SIPPs, through the middle ground where advisers have a bigger role, up to the full SIPP products aimed at sophisticated higher net worth clients with all the bells and whistles attached. There are providers operating in each sector of the market, but a high concentration at the top end, including many of the recent entrants.

  Are there really that many clients out there wanting full SIPPs with the higher level of fees involved? Many SIPP providers evidently think so. Perhaps a more important question to ask is, how many existing clients have this type of SIPP without really needing it? A modest fund size and simple investment strategy would suggest a less expensive product – lower fees do not have to mean lower levels of service.

  Our own SIPP product covers the market from the middle level upwards, with fees to match, as we see no reason why a full SIPP product should only become available at a fee of around £500 p.a. Clients should be able to get flexibility, a high level of service and access to all the features of a full SIPP from a much lower starting fee.

• Comparing different providers’ fee scales has become about as difficult as comparing mobile phone tariffs – everyone provides a slightly different service and everyone charges differently. This is partly a consequence of so many companies in the marketplace, each looking to get an edge, and to some extent is unavoidable. The FSA are right to raise concerns, though, and much could be done to get everyone speaking the same language so that customers can compare costs more easily.

• Likewise, the services offered by different providers vary considerably. Which ones give you property, unquoted equities, in specie payments, Scheme Pensions etc etc? Providers will tell you want they can do, but understandably tend to make no mention of what they do not do, making comparison of products very difficult.

  Rating services like Defaqto can help in this respect. Going through our rating process with them was a very useful exercise in clarifying what our SIPP could do and the (very few) things it does not do. Having this information more widely available would help users of SIPPs to compare products.

• SSASs really have become forgotten products, almost as if there is something wrong with them and they are best sent to the scrapheap. Given that the A Day changes have made SIPPs and SSASs virtually identical, and SSASs do have a few advantages over SIPPs, this attitude towards SSASs is surprising.

  The reality is that there is not much wrong with SSASs themselves, if there are any shortcomings they are in the way that SSASs are serviced. Product advances such as streamlined dealing services, modern IT functionality and competitive fees and bank interest rates have been introduced to a competitive SIPP marketplace, but many SSASs have not benefitted from these.

  Many providers concentrate exclusively on the SIPP market and only a few still sing the praises of SSASs. Our own approach is to take on board that they are very similar to SIPPs and, as much as possible, provide the same levels of service and functionality to both.

2 Thoughts on the Budget

The Budget changes to tax relief on pension contributions are well-documented and our own notes are available from our website. High–earners who were planning significant future pension contributions must now re-think those plans.

Unlike most rule changes, which the industry takes on board and then moves on, these still stick in the mind for a number of reasons:

• The big discrepancy over the next 2 years between those with incomes below and above £150,000. A person with income of £149,999 could make a pension contribution of, say £100,000 and get full 40% tax relief. A person with income £1 higher can only get full tax relief on a contribution of £20,000.

• The damage these complicated new rules have done to Pensions Simplification, introduced on A-Day only 3 years ago. The public are turned off pensions because they don’t understand them and we are getting towards a set of pension rules just as complex as those before A-Day.

• The damage done to the value of pensions in the eyes of decision-makers. Senior executives who are responsible for decisions on pensions for their staff are likely to have a more jaundiced view of the value of future pension provision.

The changes give the impression of not being fully thought through and could cause far more damage than the extra tax revenue they generate. A political desire to reduce tax relief on big contributions for high-earners is understandable, but there must have been a better way to go about it.

3 Scheme Borrowings

A couple of months ago HMRC confirmed a relaxation of the rules on borrowing limits where existing borrowings were renegotiated. It is worth bearing in mind that, contrary to some reports, there is no confirmation as yet that this extends to transfers of borrowings between pension schemes. The expectation is that it will, but confirmation from HMRC is still awaited and this should not be taken for granted in the meantime.