New family SIPP pools assets for retirement options
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Family SIPPs
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New family SIPP pools assets for retirement options
- 1. A new way of pension planning This presentation is directed at Professional Financial Advisers only. It should not be distributed to or relied upon by retail clients
Editor's Notes
- In this session today we will be taking a look at what the Family Suntrust is. This includes where it fits in the current self invested pensions market, the benefits and options with regards to pooled investments, the clients options at retirement, focusing on an area which may be new to you and finally a look at why you should consider AXA Winterthur for this market. The presentation is aimed as a high level generic overview in order to give you a flavour of things. The actual contract can be quite complex so if you have specific detailed questions please see me at the end or contact you usual AW BDM.
- Before A-day the only commercially viable way for clients to access a money purchase pooled pension arrangement was via a Small Self-Administered Scheme (SSAS) – so before A-day this meant an employer-sponsored scheme with employer contributions i.e. typically directors were the only ones who could access such a scheme. Further information regarding the scheme pension option is provided later in this presentation. Post A-day, with the introduction of Scheme registration rather than approval a commercially viable alternative has appeared, Individual trust based personal pensions. Additionally this individual approach allows for the inclusion of new features such as ‘scheme Pension’ as the ‘scheme pension’ concept can only be practically operated under a money-purchase scheme if it has a small membership and a common investment approach. Hence the provider-sponsored version of an employer-sponsored SSAS has become commercially viable. Now anybody can access an individual trust based SIPP (subject to meeting the provider’s minimum initial investment amount for the product).
- Since A-day there has been a huge growth in the personal SIPP market with SSAS’s seeing a more recent rise in attractiveness due to current economic conditions – which has benefited SSAS practitioners. Growth in SIPPs continues but FSA have focus on ensuring that SIPPs that look very similar to PPs are purchased for the right reasons . The choices for investing within a SSAS are wider with Managing Trustess taking responsibility for investing in such items as unquoted shares, commercial property abroad and more esoteric investments that mainstream SIPP Providers are often reluctant to engage in. AXA Winterthur has focused its attention on how is it possible to take advantage of the key elements of both a SIPP and a SSAS in one arrangement.
- With this in mind AXA Winterthur has introduced the Family Suntrust. This is an exciting opportunity which allows your clients to benefit from the best features available under the SSAS and a SIPP which you are now familiar with. It can do nearly everything a SSAS can do except a loanback to a sponsoring employer and has the benefit of not being restricted in the amount that can be used to purchase shares of a sponsoring employer. It allows a group of like minded individuals, for example family members and business partners to place their pension funds into one scheme and maximise the investment opportunities. For example on my own I could not afford to purchase a commercial property and rent it out with my pension fund, even with borrowing, however, if I was to join with other people who also wanted to invest into a commercial property we may be able to do so with our collective pension funds and consequent increased borrowing power. If however you were hoping that you would be able to use the Family Suntrust to pass pension savings down the generations without taxation then you will be disappointed as this is not possible under current legislation. So What is it?
- The typical Self Invested Personal Pensions you will have been familiar with until now would be held under a Master Trust where many clients hold their pension money, but they are not linked to any other members within the provider’s SIPP Scheme. The Family Suntrust however, is an individually registered SIPP, which can be personalised with the family name, for example ‘Shakespeare Family Suntrust’. The scheme name will normally end ‘Family Suntrust’ however, if a group does not wish to use the word ‘Family’ (for example a firm of solicitors) then a more suitable name can be agreed with AXA’s Self Investment Centre of Excellence. All the funds held within the plan are pooled together for the purposes of investing. So where can you invest?
- The Family Suntrust has a wide range of investment options. These include a range of discretionary fund managers and our offshore investment bond, known as Premier Invest, which gives access to a wide range of offshore collective investments and stocks and shares. We have a team of specialists who can help with the process of buying, selling and administration of a commercial property. Your clients will also have access to both AXA and Winterthur Trustee Investment Plans and deposit accounts. The members of the Family Suntrust can invest in a mixture of these investment options, providing that they can all agree, this is done by completing a Unanimous Written Agreement form, and this is why it is important for the members to be like minded when it comes to agreeing their investments. The agreement could be as straightforward as unanimously agreeing to appoint a DFM, or an Investment Adviser for Premier Invest, or to manage their investments in line with their agreed collective investment strategy, bearing in mind their attitudes to risk.
- A case study from our controlled launch. Architect with an existing SIPP has a major problem in that he wishes to exit the business gradually over the next 5 years and take retirement benefits, but the SIPP is all invested in the business’s commercial premises. However, how can that be achieved under the current SIPP where there is no liquidity? Originally the IFA was looking at setting up individual SIPPs for the son and son in law who also work in the business to start purchasing parts of the property from the father’s SIPP. How could a family SIPP help?
- The options at retirement are those that you would expect to see; Lifetime Annuity, Drawdown for those under and over 75, but with one important additional option, Scheme Pension. You already know how Lifetime Annuity and Drawdown options work, therefore for the purposes of this presentation I will only be looking at Scheme Pension and how this differs to the other pension income options.
- A scheme pension can be offered when a client invests his pension or following a period of USP, ASP or as a pension for a surviving spouse or dependant. The amount of pension income is calculated very much like the way other pension income is calculated; by reference to the clients pension fund size, the clients age, sex and by reference to the client’s life expectancy (including optional underwriting for cases in poor health, similar to enhanced annuities). However, the income from the Family Suntrust will also be based on the nature of the investments. Because of the way income is calculated the income is likely to be higher under scheme pension than under an annuity or ASP. Of course, if your clients live longer than expected, or investment returns are poorer than expected, the level of pension would have to reduce, as your clients’ fund remains invested in the scheme. Whilst scheme pension is available at any standard retirement age the income provided under a USP will generally be higher at 120% GAD and will have more flexible death benefit options than scheme pension, for this reason it is expected that scheme pension will be chosen at or after age 75.
- Highlight Fixed payment period IHT free and annuity payments will be capitalised and added to estate if bought in own name We will make an unauthorised payment out of scheme
- So in summary the Family Suntrust allows:- Multiple members to invest their collective pension funds under one scheme and benefit from pooling these assets for investment purposes. It allows all the normal pension options your clients would expect to have and the addition of the Scheme Pension. It will allow you to speak to families, business partners as well as your traditional SSAS and SIPP clients.
- Over 22,000 self invested clients trust us to manage over two and a half billion pounds of their money. We have a dedicated team of staff who are experienced in dealing with complex self invested arrangements. AXA Winterthur has more than 29 years experience in looking after self invested clients and was a founder member of the SIPP provider group.
- So we have looked at what the Family Suntrust is, the benefits of pooled investments, the options your clients will have at retirement and why you should look at AXA Winterthur for your clients Self Invested Pension options.
- I would like to thank you for taking the time to listen to this presentation today. If you require any further information on the AXA Winterthur Family Suntrust or our other range of products, please do not hesitate to contact your Business Development Manager.