Self-invested personal pensions (Sipp) are on a seemingly unstoppable rise.

The latest research from specialist pensions title Pensions Management shows over 600,000 plans are now in place, with most commentators predicting sales to hit over one million by 2015.

Now the industry is witnessing a new trend; a rise in execution-only (XO) Sipps - products with which investors receive no advice. But is there enough information out there for investors to make their own decisions, or are financial advisers still a necessary port of call?

According to John Moret, principal at consultancy MoreToSipps, there are more than 100,000 Sipp investors running their own Sipp, a number he believes will grow.

In the majority of cases, individual investors simply don’t believe the added value of using an adviser is greater than the cost and conclude they can do better themselves.

Risk analysis
The biggest risk of going it alone is that investments can underperform which will impact the level of retirement savings. Without advice, investors could find their portfolio isn’t diversified enough, leading to asset, interest rate, inflation and manager risk.

Of course, using an adviser doesn’t necessarily remove this risk, but the FSA crackdowns and forthcoming changes to regulation under the Retail Distribution Review (RDR) could improve this.

An enormous amount of information is available to investors, through media outlets and the fund houses themselves, but questions remain over whether that is sufficient for your average saver.

‘From my experience, the type of investors that use DIY Sipps have excellent knowledge of the types of investments they would like to use, and understand the risks attached to making their own investment decisions,’ says Billy Mackay, marketing director at AJ Bell.

‘The starting point for any potential Sipp investor is determining what their specific retirement needs are,’ Mackay continued. ‘Do you want to invest in more than just cash, unit trusts, OEICs, gilts, ETFs and corporate bonds and go into investments such as commercial property and insurance bonds?’

Mackay says if the answer is yes, then an adviser-based Sipp is probably for you, given online XO Sipps do not tend to cater for this wider investment range.’

Others aren’t as confident. Despite the plethora of information available online and from fund houses today, many had growing concerns about the use of DIY Sipps, particularly given the new era of drawdown products.

Under recent pension reforms, individuals are no longer required to annuitise at 75 years old, and providing they can meet a minimum income requirement of £20,000, can opt to put their savings in a drawdown arrangement, and draw out some of their pot as regular income.

‘The investment strategies required when converting capital into income are more complicated than in the accumulation phase. The pension rules themselves are complex, says pensions expert John Moret.

‘What is needed is much greater use of stochastic analysis which can provide a much better assessment of the relative benefit outcomes and the risks of various investment strategies.

‘Some stochastic modelling tools are being made available to investors - primarily through the workplace - but there is a long way to go and a huge educational need before we can be comfortable with the level of knowledge and understanding.’

Clifton Melvin, managing director at Sipp administrators Gaudi, believers there is a risk of 'miss-buying' if investors have complicated personal circumstances or those that pick expensive, inflexible Sipp offerings.

He says, ‘There’s a judgment call as to whether the adviser’s price represents good value, especially when costs become transparent in the post RDR world.

‘Perhaps there’s a middle ground for advisers - to help customers who are prepared to do the donkey work themselves before they sign on the dotted line, the so-called validators.’

Melvin warns that investors should not be taken in by biased information from Sipp providers and should, instead, ask what ‘kickbacks’ XO managers receive from fund managers.

‘Should Sipp investors opt for fund supermarkets or all-singing, all-dancing wraps? While wraps provide a seamless, joined-up service, this comes at a price. And the customer is locked in to both platform and tax wrapper, so if either of these fails to deliver, the choice is stay and suffer or exit entirely.’

‘[Fund] supermarkets offer more flexibility as the customer can switch Sipp provider independently of the platform, or vice-versa,’ said Melvin.

‘If you have a Sipp you are likely to have other assets and for most investors holding them all in one pot, by way of a wrap, can be a great approach,’ says Philippa Gee, managing director of Philippa Gee Wealth Management.

‘I would stress there is a major difference between fund supermarkets and wrap platforms – they are not all the same and the same boxes to tick of charges, transparency and investment choice apply just as much here.’

As with all investments timing is everything. How will today’s XO Sipp holders time their decumulation to avoid the bottom of the bear market? And how do you know when to get out of a certain asset class or pooled fund?

‘The hardest decisions may not be when to buy something but when to sell it and do you really have that up to date knowledge to take those important decisions,’ says Gee.

‘Be careful, as the impact of your decisions will last years, if not decades.’

• Charlie Thomas is an editor with the Financial Times’ Pensions & Investment Group