DIY pensions prove too complicated, as two thirds say they can't manage theirs effectively

Published: 06:45 EST, 14 August 2012 | Updated: 06:45 EST, 14 August 2012

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Less than one in three investors feel they have the expertise to manage their personal pension properly, according to new research.

Research commissioned by Investec Wealth & Investment shows that half of Self Invested Personal Pension (Sipp) holders manage their investments either themselves or with a partner, but when asked how confident they are about achieving maximum returns, less than 30 per cent feel ‘very confident’ that they have the expertise required.

Despite this, the research found that only 15 per cent of people managing their own Sipp said they were likely to appoint an investment professional to do so within the next 12 months.

Dazed and confused: Two out of three investors find DIY pensions too complicated

Only 37 per cent said they were ‘very confident’ they had the necessary time and 28 per cent the necessary expertise to ensure their SIPP continued to perform in the recent volatile market conditions.

Chris Aitken, head of financial planning at Investec Wealth & Investment, said: ‘Many people set up a SIPP thinking they will have the time and expertise to manage it properly but they realise that theory and reality can be very different.

‘Managing a SIPP properly requires time, expertise and a strong understanding of market risk and appropriate asset allocation. Unfortunately, for many people this is simply too difficult.’

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The research also found that, of those managing their SIPP themselves, only 45 per cent actually understand how their charging structures are calculated by their SIPPs provider.

The vast majority of those self-investing – some 70 per cent – felt that SIPP providers should simplify their charging structures.

Aitken added: ‘This is a poor reflection of some SIPP providers and it’s also a call to action for SIPP holders to better understand what they are paying for and whether or not their current plan represents good value and is the right product for them.’

‘Many SIPP holders will probably not fully understand the flexibility and power that a SIPP can provide.’

Why choose a Sipp?

One of the biggest benefits of a SIPP is the flexibility to choose your own investments. But this flexibility means the onus is on you to monitor, manage and make decisions about those investments, which means you need to do your homework.

There are fees involved and some SIPPs can be expensive compared to other forms of pension saving, but more and more ‘low-cost’ SIPPs are making their way into the market as middle-income investors get progressively more fed up with the poor returns on more traditional pensions.

However, if you are a basic-rate tax payer and you don’t want to give too much time over to keeping an eye on your investments, a SIPP might not be for you.

If you have a company pension scheme you should make the most of that in the first instance, particularly if your employer also makes contributions.

There are also other forms of personal pension plan, such as a stakeholder pension, which don’t require quite as much attention as a SIPP and are often cheaper too.