NEWSLETTER: Launching Acorn Lite plus an opportunity when buying an annuity and QROPS update
Contributed by MW Pensions
23 July, 2012
Contributed by MW Pensions. [www.mwpensions.co.uk]
Acorn Lite to be launched in September
We are pleased to give you advance notice that in September we will be launching a new SIPP product that we believe will meet the needs of many IFA's clients at am extremely competitive cost - and as always it is backed with our high quality personal service.
The Acorn Lite SIPP will allow investment in cash plus up to 2 regulated products - and regulated products include stockbroker accounts and platforms. The fee will be £275 VAT, with no set up fee and no upper or lower limit on fund size.
Some examples of where Acorn Light will apply:
- Cash plus a stockbroker account
- Cash plus a stockbroker account plus a Trustee Investment Plan
- Cash plus a stockbroker account plus a platform
- Cash plus a platform
- Cash plus a platform plus an OEIC
- Cash plus a Trustee Investment Plan plus an OEIC
Unregulated investments (where we allow them) and property are not eligible for Acorn Lite. They must be done via our full SIPP (the fees for which are £350 VAT set up and £600 VAT annual fee) .
Annuity purchase - an opportunity?
When an annuity purchase is made from a SSAS or a SIPP, the process is straight-forward. The IFA will normally discuss with the member the type of annuity they require - single or joint life, and contingent spouse's provision, any guaranteed increases, any guaranteed payment period etc - and then go round the marketplace to see who provides the best rate. Then, provided the rules of the SSAS/SIPP allow it, the annuity purchase is made and the member starts to receive their new insured pension.
However, if the member requires additional short term income, it may be more advantageous for a part-annuity purchase to be made. Let us give an example.
Suppose the member's remaining fund is £200,000, that they are drawing the maximum GAD pension of £16,000pa, that their pension year runs from 6th April to 5th April and that their last review was as at 6.4.11. The annuity is to be purchased as at 1st July 2012. Normally the full £200,000 would be used to purchase an annuity. However, if instead £184,000 was used for a part-annuity purchase, the RPSM requires that a pension review is carried out as at the date of the annuity purchase ie as at 1st July 2012. However, importantly, the new maximum pension does not kick in until the next pension year - in other words until 6th April 2013. For the 2012/13 pension year, the previous maximum drawdown pension of £16,000 still applies.
So under the part-annuity purchase route, the member could draw, in 2012/13, both the annual annuity pension plus the drawdown of £16,000. The member significantly increases their income for 2012/13 (though obviously subsequent years income will be lower). They will of course be subject to income tax on the whole of their income. And as no drawdown funds would remain, the review as at 1st July 2012 effectively becomes irrelevant.
Full details can be found at:
IFA's may wish to consider this as an additional option for some of their clients.
IFAs will be aware of the new requirements imposed by HMRC from 6th April 2012. One of the consequences of the changes is that several jurisdictions that were previously popular with QROPS no longer qualify for new QROPS transfers - notably Guernsey and the Isle of Man. The loophole that, in some cases, allowed people to transfer to New Zealand and then take 100% tax free cash, has also been closed - thank goodness.
Currently the main jurisdictions for QROPS transfers are Malta, Gibraltar and New Zealand (but with tax free cash restricted to a maximum of 30% and that is only after the member has been non-UK tax resident for 5 full tax years). We have a QROPS available in each of these jurisdictions.
Advisors who have potential QROPS transfer clients will need to look at the pros and cons of each of these jurisdictions and see which one best suits their client's particular circumstances. We cannot and do not give this advice. If, as is often the case, an IFA feels rather uncomfortable dealing in an area where they may have limited experience, we work with a number of firms who specialise in QROPS transfers and who are happy to work with other IFAs, sharing fees etc. If you would like us to put you in touch with such a firm, please contact us. We will always give you the names of at least two such firms.
Many QROPS transfers often involve more than 1 UK pension - as is well known, most people have more than one pension. One facility that we are able to offer is to consolidate all the member's UK pensions within an MW UK SIPP (subject to the IFA recommending pension consolidation when advising the client) and then the QROPS is simply one transfer from a UK SIPP to the overseas QROPS arrangement. This can often be very attractive and cost efficient for the client.
Unhappy with the administration services of your current SIPP or SSAS provider?
We pride ourselves on providing high quality personal service. Our fees and clear and fixed, with no hidden extras - we do not take any turns or commissions on cash or any investments. We appreciate that it is hassle for a client to move from one provider to another, and we're not a call centre.
So if someone already has a SIPP or SSAS with another provider, we make no charge for taking on that client. They just pay us the regular and normal first year administration fee.
So if you want to improve the quality of the administration services you receive at minimal hassle to your client, please contact us.
Gilt Yield for Drawdown
The gilt yields to be used for drawdown calculations are:
We do not give financial advice and no comments here are intended as such. The above information is based on our understanding of the legislation governing pensions at the time of writing. Before taking any action you should consult a qualified financial and/or tax adviser. Levels, bases of and reliefs from taxation may be subject to change.
This Newsletter is intended for professional advisors only, not members of the general public
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