SIPP market ‘underutilising’ unit-linked structures

Self-invested personal pension (SIPP) platforms are sacrificing client returns by overlooking unit-linked structures, a report from Mobius has argued.

The report, in collaboration with The Platforms Association, examined how investment structure decisions shaped outcomes for SIPP platform clients.

It argued that the SIPP market was significantly underutilising unit-linked structures, creating friction costs that eroded net returns, undermined cost efficiency, and restricted how far platforms can develop their propositions over time.

While UCITS open-ended investment companies (OEIC) “dominate” SIPP fund ranges, the report warned that platforms discounting unit-linked structures were missing an opportunity to improve client outcome and provide more scalable retirement propositions.

Although the majority of the UK unit-linked market is held within pensions, adoption remained “limited” within SIPPs.

Mobius and The Platforms Association said the gap was driven by perceived complexity, implementation cost, and an industry focus on newer structures.

They stated that UCITS OEICs remained an important part of the market, especially for liquid public assets, as their accessibility and familiarity made them well-suited to wider platform use.

However, their limitations became more apparent when the objective was providing efficient pension solutions, with costs, withholding tax, and constraints on portfolio design potentially eroding outcomes in ways not always visible to clients or advisers.

The report argued that, on the other hand, unit-link structures were more closely aligned with pension needs, and identified five key benefits for SIPPs.

These were tax efficiency, including more favourable treatment of withholding tax; access to a broader range of assets and return drivers; cost efficiency; precise portfolio construction, with changes made at the underlying level not disrupting clients; and better management of sequencing risk.

It concluded that each solution should be used where they are most effective, rather than replacing one another, with the choice becoming increasingly important as platforms develop more sophisticated retirement solutions.

“Investment structure is one of the most consequential decisions a platform makes, yet too often it's inherited rather than chosen,” said Mobius CEO, James Finch.

“UCITS funds do an important job, but when the goal is efficient retirement income, the costs and constraints add up in ways clients never see.

“Unit-linked structures already sit at the heart of the UK pension system. For SIPP providers, the opportunity isn't more choice – it's removing the friction that quietly eats into returns.

"The perception is that this opportunity means complexity and regulatory burden. In practice, for most platforms it's an extension of what they already do, which is no new permissions, no balance sheet risk, and a structure built for scale."

The Platforms Association CEO, Keith Phillips, added: “As retirement propositions become more sophisticated, platforms are having to think harder about the infrastructure underneath them.

“This report is a useful contribution to that conversation. Rather than being a case of which structure wins, the discussion should hinge on how platforms are making deliberate choices about the vehicles they use, and whether those choices serve clients in decumulation as well as accumulation.”

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