How are retail investors investing their SIPPs?

Interactive investor (ii), the UK’s second-largest platform for private investors, has launched its latest iteration of its SIPP Index, covering Q4 2024 and Q1 2025. The SIPP index looks at investment trends and behaviour in accumulation and drawdown.

To see the full SIPP Index report, click here.

The pension landscape has continued to evolve over the two years since interactive investor has tracked its SIPP customer data. With a pensions review currently under way and pensions set to be included in inheritance tax calculations from April 2027, this index provides unique insight into how SIPP customers are currently investing and positioning their pension portfolios during their working life, when they are accumulating wealth, and in retirement once they are in drawdown.

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Key findings: 

• Passive funds take the lead as the most popular funds for customers in both accumulation and decumulation for the first time
• Allocation to ETFs increased by 2% between Q1 2024 to Q1 2025 for those in accumulation
• Cash balances increased 0.7%  for those in accumulation compared to Q3 2024, as customers responded to market volatility
• Likewise, money market funds continued to surge in popularity, climbing to the third most popular fund for customers in decumulation
• SIPP customers are waiting until their mid-60s to start drawing on their pension
• Among older SIPP customers, those over 55, women slightly outperformed – with women in drawdown enjoying 17.36% returns over two years, versus 16.77% for men.

SIPP holdings over time 

Craig Rickman, Pensions Expert, interactive investor, explains: “Accounting for almost 40% of total holdings, funds are the preferred choice for SIPP investors in both accumulation and drawdown. This is understandable given the huge popularity of Vanguard’s LifeStrategy range - a mainstay of interactive investor’s top 10 most-bought list. The appeal here is that investors can access thousands of funds and fixed-interest instruments around the globe to align with their favoured risk appetite in a one-stop shop.

“Since Q1 2022, there are some notable trends to observe concerning how investors are tinkering with their SIPP holdings. One thing that stands out is the increased allocation to ETFs at the expense of investment trusts. Appetite for investment trusts has waned in recent years, and our data illustrates this is the case for investors across the board. By contrast, allocations to ETFs have surged with SIPP investors wooed by their simplicity and low costs.

“Something else that catches the eye is the increased cash holdings since Q3 2024. Drawdown investors beefed up cash allocations by around 10%, signalling concerns about the short-term trajectory of markets.

“Accumulation investors also upped their cash weightings, suggesting those who took this approach probably fell into one of two camps. They either sold out of winners and kept their powder dry to seize stock buying opportunities should they arise (which indeed came to pass in early April) or wanted some extra cushion from potential near-term downsides.

“The continued popularity of gilts, captured under ‘other’ assets, provides further evidence of investors taking a more defensive and diversified stance. As gilts are bonds backed by the government, they can provide much-treasured security and certainty during rockier periods. Increased coverage of the role gilts can play in portfolio construction means investors are better informed and have subsequently become savvier.”

Most-held investments among SIPP customers

Sam Benstead, Fixed Income Lead, notes: “It is no surprise to see six of the most popular 10 funds for SIPP investors in the accumulation stage invest passively. Vanguard has three LifeStrategy products on the list, owning between 60% and 100% in equities, with the remainder in bonds. These funds show the power of a 'set and forget' approach to growing a pension, trusting a fund group to keep allocations to different stock and bond markets consistent.

“These three funds also rank highly for investors in drawdown, showing that steady growth and low fees are important themes for many types of SIPP investors.  

“Global tracker also funds feature for investors in accumulation, with Vanguard FTSE Global All Cap Index, HSBC FTSE All-World Index and Fidelity Index World making the most-bought list. These index funds follow a market cap-weighted approaching, owning the world’s largest companies, ranked by size.  

“But other investors are taking a more active approach to growing their pension, with both Fundsmith Equity and Scottish Mortgage Ord (LSE:SMT) appearing on top lists for investors in accumulation as well as decumulation.

“While both are actively managed equity portfolios, Scottish Mortgage focuses on high-growth names, while Fundsmith prefers proven firms with a long runway of growth still ahead.

“The presence of Scottish Mortgage in the drawdown list shows that retired investors are still interested in racy growth opportunities, and could be balancing this higher-risk fund with less volatile options.

“One popular low volatility fund is Royal London Short Term Money Market, which aims to generate a 'cash-like' return by investing in safe bonds about to mature and making use of savings tools from banks. It was popular among both accumulation and drawdown pension investors.

“This tells us that the income from money market funds (which is generally a little above the Bank of England base rate, currently 4.25%) is appealing, but also that investors are worried about equity and bond market falls and are looking to protect their capital.

“Three other popular investment trusts with SIPP customers in drawdown are Alliance Witan Ord (LSE:ALW), F&C Investment Trust Ord (LSE:FCIT), and City of London Ord (LSE:CTY). While the first two offer diversified, actively selected access to global equity markets, the latter is a portfolio of UK income shares, where dividends have risen for 58 consecutive years.”

Investors are taking a measured approach

Craig Rickman adds: “Far from splashing their tax-free lump sum on a Lamborghini at the first opportunity, most SIPP pension investors are taking a measured approach and waiting until their mid-60s to start drawing on their pension. The average age both for drawing regular income and taking a lump sum is remarkably similar for men and women, suggesting that couples are planning together.

“Women take slightly more than men as a proportion of their pot, perhaps because they are lower earners on average and want to take some taxable income on top of their tax-free lump sum.”