Article by Phil
According to Investment Planners, over £500 billion of investments in the UK are now held in SIPP’s (Self Invested Personal Pensions) and this is set to grow to £1 trillion by 2030. Two thirds of these funds are held on a non-advised basis, in direct investments.
There are now five million people with SIPP’s. But how many of these investments are in ESG (Environmental, Sustainable, Governance) funds?
For the last three years there has been massive growth in investments into ESG on the back of interest in the green agenda and global support for green technologies. But this may be all over. According to US fund network and Investment Planner Calastone, over £7.5 billion has been withdrawn from ESG investment funds over the last 12 months. A lot of this is US driven. The Republican run senate has withdrawn a lot of support for the so-called green agenda, and this has investors worried. Without government funding these green businesses will have to stand on their own two feet.
There are also concerns from investors about greenwashing from businesses. That is where they claim to have ESG credentials when these are often opaque at best.
But it’s not just ESG investments. Overall, £53 billion was withdrawn from UK investments last year. Much of this went into cash deposits to be used to finance day to day living costs according to analysts.
The government is keen to promote investments in the UK to stimulate growth. One area of tax they are looking at is stamp duty. Paid on house purchases, stamp duty is also paid on share trading. Removing the duty could act as a stimulus for more investment into UK funds and companies. Although it generates over £3 billion a year, the benefits of removing or lowering the duty may well have a net positive effect. Home buyers would also benefit.
Annuity sales are also up. Growing over 45% on last year up to £5.2 billion.
This is the highest level for 10 years. Canada Life annuity sales were up by 121% to £1.2 billion for example.
However, the Financial Conduct Authority (FCA) and the Association of British Insurers (ABI) are both concerned that less than one third of all sales were advised. The majority were bought without Investment Planner advice on a self-select basis. Given that the annuity purchase probably accounts for the individuals long term retirement income, it makes sense to get professional advice. Not only to make sure it’s the right choice, but also to assist with the selection process to ensure maximum value.
Research from Just Group found that the annual income from annuities could vary by as much as 14% a year for a 70-year-old and 11% for a 65-year-old. That’s a lot of income to be missing out on because you’d didn’t select the best annuity available. The older you are when you buy the annuity the more difference between providers there is. So, its older people who need to be advised the most.
Not all investments are on the up, however. Overall investments in advised platform solutions were down by 3% last year to £180 billion. Investment Trusts were also down by 28% to under £1 billion.
