SIPP investors ramp up ESG contributions post-pandemic

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Nearly half of financial advisers say SIPP clients have put more money into ESG strategies in the wake of the pandemic, new research reveals.

In a CoreData Research survey of 350 UK financial advisers, four in 10 (40%) say SIPP clients have increased contributions to ESG investments over the past 12 months. This compares to just 2% of advisers reporting a decline in client ESG contributions.

The findings of the survey, conducted in September, appear to confirm that momentum behind ESG has been boosted by the pandemic.

The study also indicates investors have put savings accumulated during the pandemic into SIPPs as they look to grow their pension pots. About a quarter of advisers (23%) say clients have increased SIPP contributions over the last 12 months, compared to just 3% reporting reduced contributions.

And SIPP investors have adopted a risk-on approach in a bid to take advantage of buoyant markets and low interest rates in the post-Covid era. This is reflected in a bullish outlook on stocks, with almost a third of advisers (31%) saying clients have hiked contributions to equities over the last year. This compares to 3% who report that SIPP clients have dialled down their equity exposure.

This risk-on sentiment is further evidenced by investor reluctance to keep money in cash. According to a quarter (23%) of advisers, SIPP clients have lowered cash weightings over the past year. Just 5% say clients have raised cash levels.

As investors have poured money into stocks, they have pulled out of bonds amid the prevailing low interest rate environment and inflation concerns. Nearly three in 10 advisers (27%) say clients have cut their bond exposure, with only 3% reporting increased contributions.

When looking at the most sought-after SIPP investments, open-ended funds are in pole position by some distance. More than nine in 10 advisers (92%) say unit trusts and OEICs are among the top three most popular investments for clients. The next most in-demand investments are commercial property (44%), gilts and corporate bonds (35%) and investment trusts (30%).

“The fact that almost a third of advisers say investment trusts are among the most popular SIPP investments underscores the growing appeal of these closed-ended vehicles,” said Andrew Inwood, founder and principal of CoreData. “In part, this can be explained by the role of the pandemic in highlighting the ability of trusts to consistently pay dividends through use of revenue reserves. Investment trusts also offer access to alternative and private assets which are seeing increased demand as investors look for uncorrelated diversifiers capable of generating attractive returns.”

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