SIPPs, wraps and REITs on top in the UK investments market

8th August 2007
By IB Staff Writer

Wraps and real estate investment trusts have been identified as the most promising areas for future growth in the UK savings and investments market. However, in spite of the optimistic view attached to these two products, financial advisors in general believe that sales of many savings products will remain unchanged over the coming six months.

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According to research by Datamonitor, ambivalence among financial advisors towards the growth prospects of a large proportion of savings and investment options was felt largely with respect to what are regarded as the more conservative investment vehicles in the market, such as income protection, term-based insurance and guaranteed equity bond products.

Personal pensions attract different types of investors

Away from protection products, financial advisors were most enthused about the inherent potential of wrap platforms and real estate investment trusts (REITs). Personal and self-invested personal pensions (SIPPs) were also part of their favorite propositions.

The more upbeat outlook attached to this latter product is unsurprising, given recent increased desire from investors to exercise control over their retirement planning strategy. This, coupled with the billions of pounds that have been poured into SIPP products, as well as the relaxation of pensions' savings rules since the implementation of A-Day regulation, has also had an effect on carving out a potential niche for SIPP products in an area that has been marred by the concern of an impending pension's crisis.

Personal pensions, while not incorporating an overt element of self-control, are nonetheless a good option for the self-employed or those without access to a company pension scheme on the basis of its tax-privileged status.

Wrap platforms offer diversity

Wrap platforms have generated a significant amount of attention throughout the savings and investments market in recent years, with many experts and investors enticed by the convenience of being able to invest in a variety of mutual funds, life and pensions products, equity, and bond investments on one easy to manage investment platform under a single, transparent pricing structure.

At present, fund supermarkets are the primary means of distributing wrap products and, according to the Investment Management Association, fund supermarkets accounted for some 39% of unit trust and gross ISA sales in 2006. Datamonitor forecasts predict the value of wrappable assets to reach E3,859 billion by 2010.

REITs show future growth potential

REITs have received a substantial amount of publicity since their introduction into the UK market in January 2007. REITs represent an area of particular growth potential, given the fact that they give investors an opening through which to invest in physical land and buildings across all property sectors and all commercial, industrial and residential structures. Furthermore, investors can take-up a REIT proposition via their pension fund, which is now the only route at an investor's disposal to invest in property and has been a booming area of the market in recent years.

However, the UK REIT market is a nascent one, so some prominent issues still need to be ironed out which would explain why UK REITs have been affected by slightly adverse performance of late.

The fact that REITs are still in their formative years is a short-term hindrance but, like the other investments mentioned, they continue to serve as widely known buzzwords in the savings and investments market.
'End Intelliext

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