Retirement savers switching their cash from workplace final salary pensions to more accessible SIPPS is fuelling a record-breaking year for investment platforms.
Billions of pounds has flowed into online investment platforms already this year.
First quarter figures show investment was up £31 billion compared to the same period last year, helping platforms smash through the £500 billion assets under management barrier for the first time.
SIPPS have soaked up a major share of the money – £158.3 billion – according to research by financial firm Fundscape.
Meanwhile, the rest of the £520 billion has gone into ISAs (£141 billion); direct contribution pensions (£53.5 billion) and other investments (£166 billion).
Fundscape CEO Bella Caridade-Ferreira said, “Despite the likelihood that the industry will be buffeted by geopolitical headwinds this year, we expect platform business to maintain a steady course.
Pension cash fuels investments
“Pension activity will be the driver. Accessing pension freedom through DB transfers is a top priority for investors nearing retirement, and this will keep the industry buoyant throughout 2017 and well into 2018.”
The report pointed out that investors were subdued a year ago due to fears over the Brexit referendum and other economic factors at home and abroad.
So, where’s the money going?
Fundscape says the top platforms by assets under their control are:
- Cofunds (£86.8 billion)
- Fidelity (£75.2 billion)
- Hargreaves Lansdown (£74.5 billion)
- Standard Life (£47.2 billion)
- Old Mutual (£45.3 billion)
The top five platforms held their places from last year and between them control around two-thirds of total market.
Double digit returns for three platforms
Looking at growth of assets over the past 12 months, the platforms showing the best returns are:
- Aviva (13.9%)
- Aegon (13.4%)
- AJ Bell (11.6%)
- 7im (7.3%)
- Nucleus (7.1%)
“After three difficult quarters, investor sentiment began to improve in the last quarter of 2016, and gathered momentum in at the start of this year,” said Caridade-Ferreira.
“Most ISA business is now written in the second quarter, but the first quarter this year was one of the strongest quarters on record for ISA flows. Nonetheless, pension business was the real driver of platform flows — fuelled by demand for defined benefit transfers and access to pension freedom, net pension sales were up 27% on the previous quarter and 44% on like-for-like sales in 2016.”