Bankhall Conference 2009 - Axa


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Family SIPPs

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  • 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.
  • Bankhall Conference 2009 - Axa

    1. 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
    2. 2. Agenda <ul><li>Family SIPP </li></ul><ul><li>Pooled Investment Choices </li></ul><ul><li>Options at retirement </li></ul><ul><li>Why AXA Winterthur? </li></ul>06/11/09
    3. 3. Background: A Day Impact <ul><li>One set of rules for all registered pension schemes. Access now viable to individual trust based personal pension schemes </li></ul><ul><ul><li>No sponsoring employer </li></ul></ul><ul><ul><li>No need for an employer contribution </li></ul></ul><ul><ul><li>Include members who are employees but not controlling directors </li></ul></ul><ul><ul><li>Scheme pension in addition to USP / ASP </li></ul></ul><ul><ul><li>Non employees (e.g. spouse, children) as members </li></ul></ul><ul><ul><li>Pooling of scheme assets </li></ul></ul><ul><ul><li>More than one scheme per employer </li></ul></ul>06/11/09
    4. 4. Missing Link <ul><li>Market polarised post A-Day between SSAS and Personal SIPP </li></ul><ul><li>Revised interest in SSAS – particularly driven by Employer loan backs and greater investment flexibility </li></ul><ul><li>Growth in personal SIPP market continuing despite FSA focus </li></ul><ul><li>Is there something that fits between a SIPP and a SSAS? </li></ul>06/11/09 SIPP SSAS ? A new company: A new proposition
    5. 5. Family SIPP <ul><li>An exciting new opportunity </li></ul><ul><li>Effectively blends the best features of SSAS and Mastertrust SIPP, plus some new features </li></ul><ul><li>A true “Family” SIPP </li></ul><ul><li>What it is – a means for any group of like minded individuals to be members of the same scheme and maximise investment opportunities and retirement options available </li></ul><ul><li>What it is not – a means to circumvent HMRC regulations with regard to passing on tax relieved pension savings from one generation to another </li></ul><ul><li>Really better described as an individual trust based SIPP </li></ul>06/11/09 A new company: A new proposition
    6. 6. Legal Framework <ul><li>The scheme will not be written under a ‘Master Trust’ </li></ul><ul><li>Each family or group will effectively have their own ‘scheme’ via an ‘Individual Trust Deed and Rules’ </li></ul><ul><li>This will allow multi member pooled SIPP schemes </li></ul>06/11/09 SIPP Master Trust Many members & Assets all held under the ‘ Master Trust’ Assets will be held as pooled investments Family SIPP ‘ Family’ Dad Mum Kids
    7. 7. Pooled Investment Choices <ul><li>Discretionary Fund Manager (DFM) </li></ul><ul><li>Premier Invest </li></ul><ul><li>UK Commercial Property </li></ul><ul><li>Offshore Bonds </li></ul><ul><li>Trustee Investment Plans </li></ul><ul><li>Deposit Accounts </li></ul>06/11/09 <ul><li>The choice of investment must comply with the Revenue’s rules for authorised investments . Broadly this means quoted stocks & shares, authorised unit trusts, investment trusts, Open Ended Investment Companies, suitable commercial property as well as investment funds of insurance companies. </li></ul><ul><li>A designated bank account will be set-up for each Family Suntrust scheme.  All transactions are made using this account.  Interest is calculated daily on funds remaining in the account & will be credited to the account quarterly. </li></ul>
    8. 8. To pool or not to pool….. 06/11/09 <ul><li>Potentially enables much larger value assets to be purchased when compared to a single SIPP </li></ul><ul><li>Larger borrowing opportunities if members pool their assets </li></ul><ul><li>Contributions are deemed to be for the benefit of the member who made them, however, potentially there may be different ways of allocating investment growth between the members </li></ul>OFFICE A SIPP B SIPP C SIPP SIPP OFFICE Contributions and Transfer Values A B C Family SIPP
    9. 9. Pooled Fund – An example case study <ul><li>Derek Tor is 59 and he is a member of a Mastertrust SIPP. </li></ul><ul><li>The major part of fund is commercial property with little if any liquidity and maximum borrowing. </li></ul><ul><li>His son and son in law in same architects business and they have small personal pensions </li></ul><ul><li>The family are interested in ideas for long term expansion of business and an exit strategy for Dad over next 5 years </li></ul>06/11/09
    10. 10. Possible solution? 06/11/09 <ul><li>One pooled fund rather than 3 Mastertrust SIPPs </li></ul><ul><li>Son and son in law transfer existing pensions and pay contributions to create liquidity over next 5 years for father’s retirement for both cash and income </li></ul><ul><li>Other family members who are not in the business can also join </li></ul><ul><li>Maintenance of property in pension for long term </li></ul>Son in Law Derek Tor Son Family SIPP
    11. 11. Options at retirement <ul><li>Lifetime Annuity </li></ul><ul><li>Unsecured Pension (USP) </li></ul><ul><li>Alternatively Secured Pension (ASP) </li></ul><ul><li>Scheme Pension </li></ul>06/11/09
    12. 12. Scheme Pension <ul><li>A form of “secured” pension </li></ul><ul><li>Available from individual trust based money purchase schemes as well as DB schemes </li></ul><ul><li>Individually determined pension from ring fenced fund with no mortality cross subsidy </li></ul><ul><li>Scheme Pension is calculated by reference to </li></ul><ul><ul><li>the fund size (minimum £100,000) </li></ul></ul><ul><ul><li>the age, gender and life expectancy of the individual and the nature of the investments </li></ul></ul><ul><ul><li>the other usual factors such as the likely level of charges and payment frequency </li></ul></ul><ul><li>Potentially higher income than annuity or ASP </li></ul><ul><li>10 year fixed payment period possible </li></ul><ul><li>Dependants pension can be provided from any remaining fund on death </li></ul>06/11/09
    13. 13. Scheme Pension <ul><li>When can you have it? </li></ul><ul><li>It can be offered at outset when the pension commences </li></ul><ul><li>Following a period of USP </li></ul><ul><li>Following a period of ASP </li></ul><ul><li>For surviving spouse/dependant </li></ul><ul><li>Likely to be most widely used at or post age 75 </li></ul>06/11/09
    14. 14. 06/11/09 Income available Alternatively Secured Pension AXA Scheme Pension Options affecting income available When is income reviewed Fixed payment period Is payment in fixed period following members death subject to IHT Spouse’s benefit Left over funds 1. Charity payment no tax 2. Where allowed, payment out of fund max 82% tax <ul><li>To unconnected parties within scheme no tax </li></ul><ul><li>Left in general fund to pay future charges no tax </li></ul><ul><li>Paid out of scheme max 73.2% tax </li></ul>Health Selected by client and must be between 55% & 90% of GAD rates for 75 year old Actuarially set, based upon age, gender, life expectancy & yield assumptions None available Level or increasing, up to 10 year fixed payment period No Yes, up to 10 year fixed payment period Not an available option within ASP No, as payments subject to administrator’s discretion Annually, always based upon 75 year old At least every 3 years – actual age N/A Yes – underwriting possible at outset and reviews Yes, (ASP/USP/Annuity/Scheme pension) from remaining fund (if any) Yes, (ASP/USP/Annuity/Scheme pension) from remaining fund (if any)
    15. 15. Benefits of Family SIPP <ul><li>Allows multiple members under one Trust arrangement (previously only available for Occupational Schemes) </li></ul><ul><li>Allows members to ‘pool’ assets under one scheme which could be an advantage with regard to economies of scale, administration, investment opportunities and therefore potentially from a growth point of view </li></ul><ul><li>Allows a wider range of income options on retirement than a traditional SIPP </li></ul><ul><li>Will appeal to families, business partners, as well as traditional SSAS / SIPP type clients </li></ul>06/11/09 Charges on the Family Suntrust may be higher than for a personal pension or a stakeholder plan .
    16. 16. Why AXA Winterthur? AXA Winterthur: First class Heritage & Strength <ul><li>AXA </li></ul><ul><ul><li>29 years of looking after self-invested customers* </li></ul></ul><ul><ul><li>22,000 self-invested customers with over £2.5 billion invested** </li></ul></ul><ul><ul><li>130 dedicated staff providing knowledgeable and confident expertise** </li></ul></ul><ul><li>Winterthur </li></ul><ul><ul><li>Founder member of SIPP provider group (now the Association of Member Directed Pension Schemes) </li></ul></ul>06/11/09 *Sun Life Assurance Society, now part of AXA, has been involved in the self-invested pensions market since it inaugurated its first SSAS scheme in November 1979 **Figures as at April 2009
    17. 17. Summary <ul><li>Family SIPP </li></ul><ul><li>Pooled Investment Choices </li></ul><ul><li>Options at retirement </li></ul><ul><li>Why AXA Winterthur? </li></ul>06/11/09 This presentation is a very high level introduction to the Family Suntrust proposition and a recommendation to invest should not be made on the basis of this presentation alone.
    18. 18. Important Information 06/11/09 <ul><li>The minimum joint initial investment is £200,000. </li></ul><ul><li>Charges may be higher than for a personal pension or stakeholder plan. </li></ul><ul><li>For Scheme Pension its worth noting that a clients future pension income is not guaranteed. There is a risk that investment performance could be poorer than expected or actual life expectancy is better than assumed meaning income from Scheme Pension could reduce or stop all together. </li></ul><ul><li>The value of investments can fall as well as rise and is not guaranteed – this means that your clients could get back less than they invest. </li></ul><ul><li>Please remember that there could be a delay when selling commercial property. </li></ul><ul><li>Full details of our range of products and services are available on request </li></ul><ul><li>The information contained within this presentation is based on our understanding of present law and HM Revenue and Customs practice, which may be subject to change. The value of any tax benefits depends on individual circumstances. </li></ul><ul><li>The address for written communication is AXA, PO Box 1810, Bristol, BS99 5SN. </li></ul><ul><li>The telephone number of AXA is 0117 989 9000. </li></ul><ul><li>AXA is a worldwide insurance group. </li></ul><ul><li>This product is provided by AXA Sun Life plc. The AXA Winterthur Wealth Management proposition is offered by companies within the AXA UK group of companies which includes AXA Sun Life plc. AXA Sun Life Services plc distributes financial products for this proposition and is issuing this item. AXA Sun Life Services plc is authorised and regulated by the Financial Services Authority and is a company limited by shares, registered in England No. 3424940, registered office: 5 Old Broad Street, London, EC2N 1AD. As part of our commitment to quality service, telephone calls may be recorded. </li></ul>