ACCA Harrow
Investment Planning
1st June 2009
Nick Webb – Regional Sales Manager
Tom Dickerson – Business Consultant
Agenda
• The regulatory environment
• The framework of advice
• Investment process
• Tax Mitigation wrappers
   – IHT
   –...
Regulatory Framework
Risk comes from not knowing
what we are doing




            Warren Buffet
The regulatory environment
retail distribution implementation programme
(RDIP)
• Clarity of Service
• Professional Standards
• Remuneration
one view of 'clarity'




Source: FS08/6: Retail Distribution Review, November 2008
our view of clarity




                      Money Guidance
RDIP – professional standards
• ‘For all investment advisers, there is a benchmark
  qualification of at least QCA level 4...
remuneration
‘For customers to understand clearly the different services
being provided and to recognise the value of advi...
The FSA aim to achieve four things:

• capable and confident consumers
• simple and understandable information for, and
  ...
TCF Outcome 5


Consumers are provided with products that perform
as firms have led them to expect, and the associated
ser...
Investment process
Investment process

                     119,000,000
                     results!
robust investment process
   1                   Consistent Risk Assessment



   2                     Robust Asset Alloc...
robust investment process



 1       Consistent Risk Assessment
Attitudes to risk




                    • 2 – 1 on red
                    • £1 stake?
Play again…?




                       • Bet your house



   Risk is meaningless without a consequence
Risk – a definition
                               High probability, low impact




Low probability, high impact
         ...
Goals and consequences


              • What do you want to do in
                retirement that requires you to
       ...
TCF outcome 5


Consumers are provided with products that perform
as firms have led them to expect, and the associated
ser...
what do investors feel about their investments?
Asymmetric utility

                                 2
       Happiness
  ...
risk profiling
                 • Subjective measures?

                    – naïve and dangerous

                 • Risk...
robust investment process




  2        Robust Asset Allocation
assumptions




         Investment                           Ongoing                             Asset
           returns...
risk assessment and asset allocation



                               ESTABLISH
        RATE                   EFFICIENT ...
optimising the asset class




Source: Selestia Investment Solutions/Watson Wyatt Ltd June 2007
risk assessment and asset allocation


                               ESTABLISH
        RATE                   EFFICIENT  ...
Fund selection
                 • The Ruler test
                 • Brand
                 • The ‘star’
Fund-picking
      • 1,807 funds*
      • Odds on randomly picking best fund three years
        in a row?

              ...
Odds on picking the best portfolio?
Choosing best fund in each sector



  23,011,691,206,304,399,999,999,999,999 -1




 ...
Tax Mitigation
Tax wrappers
•   IHT schemes
•   Pension
•   Collectives
•   ISA
Inheritance tax planning

• Protection contracts
• Mitigation contracts
Mitigation schemes

•   Loan schemes
•   Retained interest trust arrangements
•   Discounted gift schemes
•   Gift schemes
Loan trust

• Client decides how much capital is loaned
• Access to “income” by way of loan
  repayments
• Can demand at a...
Retained interest trust
• Access to capital
• Gifted capital is a CLT
• Control of capital maintained
• Enhanced 5% allowa...
Discounted gift
Discounted gift

• Loss to transferor’s estate
Discounted gift

• Loss to transferor’s estate
• Value of what transferor gives away
  MINUS today’s value of any rights t...
Discounted gift

• Split benefit trust separating out the
  entitlement to distinct rights under the
  contract
Discounted gift trust
                         Settlor

 Settlor +
 Other(s)               Trustees

             Settlor’...
Discounted gift trust

• Choice of withdrawals
Discounted gift trust


• Examples of discounts
   Age                  Discount*      IHT saving
   Male 65              ...
Discounted gift trust

• Examples of discounts
    Age                 Discount*     IHT saving
   Male 65              £6...
Discounted gift trust


• Flexibility re ‘income’ – deferred start
   date, escalation, partial waiver, full
   waiver
Gift trust
• Prepared to make unconditional gift but
  not directly
• No future access to funds in any
  circumstances
• C...
Pensions
Pensions: Limiting Tax Relief for High Income Individuals
Overview
• Clients with relevant income over £150k
• w.e.f 06/04/2011 tax relief at basic rate
• Immediate ‘anti avoidance...
149k →
£150k Relevant Income Limit
                               “Special
                              Allowance
       ...
Special Annual Allowance
• Individuals with income of £150k or more
• Overall pension savings £20k or more
• Tax relief on...
Protected Pension Input
• Value of ‘regular pension savings’ receives full tax relief even if
  exceeding £20,000 special ...
Opportunities
• 300,000 individuals over £150k

• 800,000 individuals over £100k

• 2009/10 £20k higher rate relief
      ...
Tax Relief Restrictions on Pension
Contributions
• From 2011/12 tax relief restricted on pension contributions for
  indiv...
Points for Action
• Is client caught by relevant income cap ?

• If so, for which tax years ?

• Gift aid and £20,000 pers...
Points for Action
• Maximise the full income tax relief available for this and
  next tax year on pension contribution lim...
ISA Changes

•   Increase from £7,200 to £10,200 pa
•   Cash Allowance increase for £3,600 to £5,100
•   October 2009 for ...
Skandia UK’s proposition
Market context: Old world moves to new model



Traditional    Unit linked     Multi-          Fund
With-profits          ...
Strategy : Evolving market




                             ‘   ‘




                                     64
Strategy : Approach to an evolving market



                                               New Model
                    ...
ACCA Harrow Investment Planning
ACCA Harrow Investment Planning
ACCA Harrow Investment Planning
Upcoming SlideShare
Loading in …5
×

ACCA Harrow Investment Planning

396 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
396
On SlideShare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
10
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

ACCA Harrow Investment Planning

  1. 1. ACCA Harrow Investment Planning 1st June 2009
  2. 2. Nick Webb – Regional Sales Manager Tom Dickerson – Business Consultant
  3. 3. Agenda • The regulatory environment • The framework of advice • Investment process • Tax Mitigation wrappers – IHT – Pension – Collectives – ISA • Skandia
  4. 4. Regulatory Framework
  5. 5. Risk comes from not knowing what we are doing Warren Buffet
  6. 6. The regulatory environment
  7. 7. retail distribution implementation programme (RDIP) • Clarity of Service • Professional Standards • Remuneration
  8. 8. one view of 'clarity' Source: FS08/6: Retail Distribution Review, November 2008
  9. 9. our view of clarity Money Guidance
  10. 10. RDIP – professional standards • ‘For all investment advisers, there is a benchmark qualification of at least QCA level 4 and possibly higher levels for designated specialists, but all individuals are encouraged to opt for higher levels to suit their specific needs.’ • Blue print and mapping by mid 2009 • Diploma or AFPC Source: FS08/6: Retail Distribution Review, November 2008
  11. 11. remuneration ‘For customers to understand clearly the different services being provided and to recognise the value of advice, separate disclosure is required of the costs of advisory services from product costs.’ Source: FS08/6: Retail Distribution Review, November 2008
  12. 12. The FSA aim to achieve four things: • capable and confident consumers • simple and understandable information for, and used by, consumers • well-managed and adequately capitalised firms that treat their customers fairly • risk-based and proportionate regulation Source: Sarah Wilson FSA keynote Speech October 2007
  13. 13. TCF Outcome 5 Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
  14. 14. Investment process
  15. 15. Investment process 119,000,000 results!
  16. 16. robust investment process 1 Consistent Risk Assessment 2 Robust Asset Allocation 3 Fund Selection Process Outsource Fund Selection and 4 Review Fund Selection Outsource Fund Review 5 Client Review (to include re-assessment of attitude to risk)
  17. 17. robust investment process 1 Consistent Risk Assessment
  18. 18. Attitudes to risk • 2 – 1 on red • £1 stake?
  19. 19. Play again…? • Bet your house Risk is meaningless without a consequence
  20. 20. Risk – a definition High probability, low impact Low probability, high impact Probability X Impact
  21. 21. Goals and consequences • What do you want to do in retirement that requires you to have money? • What are the consequences of not achieving it?
  22. 22. TCF outcome 5 Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
  23. 23. what do investors feel about their investments? Asymmetric utility 2 Happiness 0 -2 Wealth Utility Market Returns -4 -6 -8 -10 -12 Disappointment Utility -14 … the pain of absolute loss is greater than the pleasure of absolute gain
  24. 24. risk profiling • Subjective measures? – naïve and dangerous • Risk Profiler – reflects loss tolerance of a population – Score identifies investor’s ‘rank’ • Employ a portfolio that targets that volatility – A ‘no surprises’ portfolio
  25. 25. robust investment process 2 Robust Asset Allocation
  26. 26. assumptions Investment Ongoing Asset returns charges correlations Volatility Tax *Watson Wyatt Ltd provide the risk profiling and asset allocation tools for Selestia Investment Solutions
  27. 27. risk assessment and asset allocation ESTABLISH RATE EFFICIENT DETERMINE ATTITUDE MAKE PORTFOLIO PORTFOLIO TO ASSUMPTIONS FRONTIER ASSET ALLOCATION RISK FOR EACH WRAPPER
  28. 28. optimising the asset class Source: Selestia Investment Solutions/Watson Wyatt Ltd June 2007
  29. 29. risk assessment and asset allocation ESTABLISH RATE EFFICIENT DETERMINE ATTITUDE MAKE PORTFOLIO PORTFOLIO TO ASSUMPTIONS FRONTIER ASSET RISK FOR EACH ALLOCATION WRAPPER
  30. 30. Fund selection • The Ruler test • Brand • The ‘star’
  31. 31. Fund-picking • 1,807 funds* • Odds on randomly picking best fund three years in a row? 5,900,304,942-1 And in a portfolio? Non-Managed Funds with a 1 year track record to 19th January 2007
  32. 32. Odds on picking the best portfolio? Choosing best fund in each sector 23,011,691,206,304,399,999,999,999,999 -1 Ensure the required result, rather than the best result
  33. 33. Tax Mitigation
  34. 34. Tax wrappers • IHT schemes • Pension • Collectives • ISA
  35. 35. Inheritance tax planning • Protection contracts • Mitigation contracts
  36. 36. Mitigation schemes • Loan schemes • Retained interest trust arrangements • Discounted gift schemes • Gift schemes
  37. 37. Loan trust • Client decides how much capital is loaned • Access to “income” by way of loan repayments • Can demand at any time full capital repayment of outstanding loan • All growth on capital belongs to the beneficiaries free of IHT
  38. 38. Retained interest trust • Access to capital • Gifted capital is a CLT • Control of capital maintained • Enhanced 5% allowance under bond
  39. 39. Discounted gift
  40. 40. Discounted gift • Loss to transferor’s estate
  41. 41. Discounted gift • Loss to transferor’s estate • Value of what transferor gives away MINUS today’s value of any rights that still belong to him/her
  42. 42. Discounted gift • Split benefit trust separating out the entitlement to distinct rights under the contract
  43. 43. Discounted gift trust Settlor Settlor + Other(s) Trustees Settlor’s fund - Residual fund - based upon contribution mortality & less value of level of Settlor’s fund withdrawals Immediate CLT/PET Discount
  44. 44. Discounted gift trust • Choice of withdrawals
  45. 45. Discounted gift trust • Examples of discounts Age Discount* IHT saving Male 65 £46,735 £18,694 Male 85 £44,526 £17,810 Female 70 £47,613 £19,045 Female 85 £29,550 £11,820 *Based on investment of £100,000 and an “income” level of 5% p.a. Normal discount factors apply
  46. 46. Discounted gift trust • Examples of discounts Age Discount* IHT saving Male 65 £65,249 £26,100 Male 85 £65,312 £26,125 Female 70 £65,490 £26,196 Female 85 £43,912 £17,565 *Based on investment of £100,000 and an “income” level of 8% p.a. Normal discount factors apply
  47. 47. Discounted gift trust • Flexibility re ‘income’ – deferred start date, escalation, partial waiver, full waiver
  48. 48. Gift trust • Prepared to make unconditional gift but not directly • No future access to funds in any circumstances • CLT or PET for IHT purposes
  49. 49. Pensions Pensions: Limiting Tax Relief for High Income Individuals
  50. 50. Overview • Clients with relevant income over £150k • w.e.f 06/04/2011 tax relief at basic rate • Immediate ‘anti avoidance measures’ • ‘Special Annual Allowance’ • ‘Special Annual Allowance charge’ • Regular ‘pension savings’ pattern
  51. 51. 149k → £150k Relevant Income Limit “Special Allowance 151k Charge” ↓
  52. 52. Special Annual Allowance • Individuals with income of £150k or more • Overall pension savings £20k or more • Tax relief on additional pension saving at basic rate • Special annual allowance charge (20%) • Collected via Self Assessment return
  53. 53. Protected Pension Input • Value of ‘regular pension savings’ receives full tax relief even if exceeding £20,000 special annual allowance • Regular pension savings defined as benefits accruing or contributions payable no less frequently than quarterly • Where regular pension savings are less than £20,000, additional contributions can be made to £20,000 limit with full tax relief
  54. 54. Opportunities • 300,000 individuals over £150k • 800,000 individuals over £100k • 2009/10 £20k higher rate relief 2010/11 £20k higher rate relief 2011/12→ basic rate relief • Make a gift to charity
  55. 55. Tax Relief Restrictions on Pension Contributions • From 2011/12 tax relief restricted on pension contributions for individuals with taxable income in excess of £150,000 • Relief to be tapered from 50% to 20% for those with taxable income of £180,000 or more • Basis of tapering awaiting Treasury consultation • Transitional legislation proposed to restrict tax relief for those with taxable income of £150,000 plus for current and next tax year • Clients affected where taxable income is £150,000 or more in current or previous two tax years
  56. 56. Points for Action • Is client caught by relevant income cap ? • If so, for which tax years ? • Gift aid and £20,000 personal contribution to registered pension scheme can be used for this tax year to reduce income below threshold • Significant difference in potential tax relief available if income cap does not apply
  57. 57. Points for Action • Maximise the full income tax relief available for this and next tax year on pension contribution limit available • Work with professional connections essential in run up to end of tax year in determining relevant income position for clients who might be caught
  58. 58. ISA Changes • Increase from £7,200 to £10,200 pa • Cash Allowance increase for £3,600 to £5,100 • October 2009 for age 50+ • April 2010 for everybody else
  59. 59. Skandia UK’s proposition
  60. 60. Market context: Old world moves to new model Traditional Unit linked Multi- Fund With-profits manager supermarket Platform creating innovative solutions
  61. 61. Strategy : Evolving market ‘ ‘ 64
  62. 62. Strategy : Approach to an evolving market New Model Advisers Skandia Investment Skandia Life Traditional/Transition Solutions Mirror funds Transition / New Model Limited open architecture Direct OEIC Bundled Total open architecture Paper + Un-bundled Protection/ Online Personal Pension/Bond Pension/Bond/ISA/ Collectives/Offshore All products 65

×