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NEWSLETTER: Using SIPPs to Rejuvenate Older Investments, and Key Features Illustration Changes for SIPPs

Contributed by MW Pensions
30 May, 2013

Contributed by MW Pensions. [www.mwpensions.co.uk]

Key Features Illustrations must be given BEFORE a SIPP is set up

As a result of changes brought in by the Financial Conduct Authority, that were effective from 6th April 2013, it is now a requirement that, before a SIPP is set up, the member must be provided with a Key Features Illustration.  The exemptions for SIPP Providers in this respect have been removed.

Whilst this inevitably imposes additional costs on SIPP Providers like ourselves we, at least at this stage, (along with we understand the majority of other SIPP Providers) are providing this service without any change to our fees.

As part of this change (as we explained last month) SIPP Providers must also disclose within those illustrations what income they receive from any underlying investments, including SIPP bank balances. That disclosure must be a good thing. We reiterate that we take nothing from any investment.

Using SIPPs to “rejuvenate” older investments?

We believe that platform SIPPs provide an opportunity for advisors to sensibly and constructively review the “older” pension investments for some of their clients. Our Acorn Lite SIPP is ideal for this. Let us explain.

Under Acorn Lite, cash and up to 2 other “regulated” investments can be held. A platform, or indeed a discretionary fund manager, is classed as one “regulated” investment. The fees for Acorn Lite are extremely competitive – there is no set up fee and the annual fee is £275 + VAT.

Many IFAs probably have a significant number of clients who have “old” insured pension arrangements. Some of these may have high charges and/or poor investment performance (it is of course for the advisor to consider this and advise their clients accordingly).

Many platforms have low fees - though advisors must fully analyse all charges associated with a particular platform eg are there any payments to the platform from the underlying investments etc?

Therefore in some cases it may be in the client’s best interest to move away from their current “old” insured pension policy(ies) into more modern pension investments that are on a platform and which are all held within our Acorn Lite SIPP. Potentially everyone will benefit – the client may have better and more appropriate investments at lower ongoing cost (any switching costs/penalties will of course have to be fully considered by the advisor) and the advisor will earn fees from the advice. It may even be that the existing insurer does not lose their existing business as one option would be to leave the investments with the same insurer but transfer them to that insurer’s more modern investments utilising the Acorn Lite SIPP and the platform. Again, it will be for the advisor to consider all aspects, including expected future investment performance, ongoing charges (investment charges, platform and SIPP fees) along with any transfer/exit penalties.

As we mentioned above, Acorn Lite allows an additional regulated investment. So if a client has a pension investment that the advisor and client are happy with eg a Trustee Investment Bond, that investment can be held alongside the platform investments within the Acorn Lite at no extra ongoing cost (though a one off ‘in specie’ transfer charge of £150 + VAT will apply). Similarly, this can be a useful facility if say an existing pension investment has guaranteed annuity rates.

Acorn Lite will work on most platforms.

Gilt Yield for Drawdown

The gilt yields to be used for drawdown calculations are:

April 2013


May 2013


June 2013


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. 

MW Pensions Ltd
Oaklands Park
Hooton Road
South Wirral
CH66 7NZ

Tel: 0151 328 1777 Fax: 0151 328 0707

website: www.mwpensions.co.uk e-mail: admin@mwpensions.co.uk
Authorised and Regulated by the Financial Services Authority


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