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UK’s InvestEngine launches ETF-based SIPP

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Investment platform InvestEngine has launched its self-invested personal pension (SIPP) dedicated to ETFs.

The firm writes that by investing solely in ETFs, the InvestEngine SIPP offers a simple and low-cost way for people to build up assets over the longer-term.

InvestEngine believes that SIPPs are a good way to encourage greater engagement by individuals in their retirement planning, with its app-based service making it easier for people to check-in on their pension.

Its latest research found that more than a third (35 per cent) of adults with just a workplace pension admit that they don’t engage with their retirement fund. By contrast, four out of five (81 per cent) people with both a workplace pension and a SIPP described themselves as engaged with how their pension was performing. The research also revealed a low level of understanding among younger generations, with a third (32 per cent) of 18-34 year olds either unsure or not believing pensions were a form of investment.

Low engagement is an ongoing problem facing the pensions industry, the firm says. In its recent report, Building a nation of investors, InvestEngine found that only around a quarter (27 per cent) of UK adults listed saving for their retirement as one of their top financial goals, with almost half (47 per cent) of young and middle-aged adults (18-54 year olds) now saying that long-term financial issues, like preparing for retirement, are too far away to prioritise right now.

Andrew Prosser, Head of Investments at InvestEngine, says: “There are lots of reasons why people don’t save for their retirement; for many, the pressure on day-to-day finances means they are struggling to prioritise long term investment, while others simply see retirement as something so far in the future that they cannot see the point in investing now.

“But this needs to change, otherwise millions of people in the UK could be heading for difficulties later in life.”

InvestEngine’s research found that those individuals who have a SIPP are more active in managing their retirement fund than those with only a workplace pension, such as looking at where it is invested (27 per cent vs. 13 per cent), increasing contributions (21 per cent vs. 14 per cent) and downloading an app to better manage their funds (21 per cent vs. 12 per cent).

A third of individuals (32 per cent) with a SIPP say they check their pension several times a year. By contrast, more than half (53 per cent) of those with only a workplace pension admit they have never taken any action to check or manage their retirement fund, leaving them at risk of being charged excessive fees, suffering poor performance and potentially losing track of it over time.

Earlier this year, the Institute for Fiscal Studies found that fewer than one-in-five self-employed workers are paying into a pension, made all the more concerning due to the rise in self-employment in recent years.

Prosser continues: “While most people in full-time employment will have a workplace pension as well as the state pension to rely on in later life, for many this will still fall short of providing them with the comfortable retirement they are hoping for. For those who are self-employed, the challenges can be even greater.

“When it comes to growing your pension pot, the best route for many will be via ‘little and often’ investing through diversified and low-cost funds like ETFs.

“That is why we have launched the InvestEngine SIPP – to offer a more low-cost and flexible pension option to help encourage those who are not yet saving for their financial futures to get into the habit of making regular investments so that they can start building up their retirement pots.”

The InvestEngine SIPP costs 0.15 per cent – capped at GBP200 a year – plus the cost of investments, and investors can choose their own investments via the DIY Portfolio, which is commission-free, or have InvestEngine manage it for them for 0.25 per cent pa.

Investors have full access to their portfolio via the InvestEngine app or web dashboard where they can see exactly which companies, sectors and regions they are invested in. They will also enjoy tax relief on income paid into their InvestEngine SIPP, from a guaranteed 20 per cent and to up to 45 per cent for additional-rate taxpayers.

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