In the wake of the introduction of new pension freedoms in the UK, Standard Life has outlined its top ten tips for advisors looking to make the most of the new opportunities.
The tips are designed to highlight immediate risks and opportunities as well as longer term strategic considerations to help advisers support more clients in achieving their goals. Urgent action is suggested to ensure pension death benefits are not lost due to legacy pension contracts, and, ISA assets are transferred to pensions as clients approach retirement to benefit from tax relief.
The ten tips encompass death benefits, tax, investment solutions, due diligence, policies and controls:
1. Find out if you have clients that could miss out–- review legacy pensions to understand which contracts can support new flexibilities on death
2. Prepare to transfer pensions that do not support death benefits as soon as possible and consider aggregating pension assets with other client assets
3. Review all pension bypass trust arrangements and death benefit nominations to ensure they are up-to-date
4. Review ISAs to establish whether the client would benefit from transferring to a pension to access tax relief
5. Develop a tax optimisation policy for assets being invested pre-retirement; outlining which wrappers should be prioritised and why
6. Enhance your CIP to meet the needs of clients in retirement – reflect the difference between short, medium and long term monies and protect your clients from the devastating long term impact of a short term market fall in the early years of retirement
7. Develop an income optimisation policy for withdrawals; document the order of wrappers and investment portfolios used to support withdrawals to minimise tax and investment risk
8. Agree a clear withdrawal policy with your clients documenting the sustainable asset harvesting approach you have agreed
9. Document your end to end retirement advice service for clients highlighting the measures you are taking to ensure the sustainability of their investment portfolio
10. Review due diligence against your new documented proposition to ensure your business model for clients exercising retirement freedoms is well supported by your providers
David Tiller (pictured), Head of Adviser Propositions and Strategy at Standard Life, says: “We really have entered the golden age for advisers who now have the opportunity to provide more of the population with advice when they need it most. This need has never been greater and it is vitally important the industry works together to ensure that people can access the help they need.
“Client needs in retirement are fundamentally different and adviser businesses need to consider how to deliver what is often perceived to be complex advice in a scalable and controlled manner. This demands clear and defined processes and policies around tax optimisation, investment volatility management, tax wrapper and portfolio targeting, client withdrawal policy and estate planning.
“By putting together a clearly defined proposition and business processes built for clients in retirement, I believe the efficiencies realised will allow advisers to offer a top quality service to more retired clients and manage their business risks more effectively. These ten tips are designed to prompt thought around some of things advisers may want to look at.”