it's time for a fresh approach to tax planning - Adviserzone

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it's time for a fresh approach to tax planning - Adviserzone

Because

it’s time for a

fresh approach

to tax planning

For adviser use only


Contents

01 How this guide can help you

02 Introducing our fresh approach to tax planning

03 Helping you to demonstrate the value of your advice

to each of your clients

04 Pensions opportunities for your clients

06 Example of how this might all work in practice

08 ISA opportunities for your clients

10 Offshore Bond opportunities for your clients

12 Ways we can help you right now


How this guide can help you

Whether you’re doing all year round tax

planning or are focused on tax year end, helping

your clients to make the right financial decisions

is as important now as ever before. And, in

the ever changing financial landscape, being

able to demonstrate how you add value to your

clients really matters. That’s where our fresh

approach can make a real difference.

This guide is an introduction to our fresh

approach, how it can benefit you and your

clients and includes information about the

products, tools, technology, technical support

and services which we offer you to support

it. We believe we can really help you to make

the most of all the tax planning opportunities

available to your clients now and in the future

–always with your clients’ long-term financial

goals at the heart of what we do.

Discover more by:

¬ reading this guide

¬ talking to your usual Standard Life

Account Manager

¬ visiting our Tax Planning hub at

www.adviserzone.com/tax

¬ follow us on Twitter

Standard Life @sl_adviser

Important information

When reading this guide you should remember that the actual tax treatment will depend on each

individual’s circumstances. The information given in this booklet is based on Standard Life’s

current understanding of law and HM Revenue & Customs practice as at January 2012 and both

may change in the future. As with any investment the value of your clients’ fund can go up or down

and may be worth less than what was originally paid. Also, no guarantees are given regarding the

effectiveness of any arrangements entered into on the basis of the information contained within

this guide.

How this guide can help you 01


Introducing our fresh approach

to tax planning

The tax planning landscape is constantly

changing for you and your clients. Changing

pensions legislation, combined with the

forthcoming effects of RDR will require a more

flexible long-term approach to tax planning

going forward – an approach driven by

individual client needs and goals.

To help you meet this challenge, we have

created a fresh approach to tax planning, which

we believe can really help you to demonstrate

the value of your advice to your clients –

whether you’re focused on the tax year end or

doing all year round tax planning.

Solutions for a lifetime, not just

a tax year

Seizing the potential opportunities at tax year

end is always important for you and your clients.

But it’s just as important to see the long term

picture too.

You will want to maximise your clients’ tax

allowance opportunities now to help them build

the wealth they need to enjoy retirement to the

full. But, will the tax wrappers and investments

selected today be the ones your clients need to

enjoy their wealth in the most flexible and taxefficient

way a number of years from now

Flexible enough for your clients’

changing plans

Clients may also wish to pass on their wealth

tax-efficiently. The choices you help them to

make now therefore need to have this flexibility

for the future built in. Our balanced approach

uses a diverse range of solutions – a mix of

pensions, ISAs, Bonds and Mutual funds –

to help you and your clients to take full

advantage of the opportunities available in

the short-term but always with an eye fixed

firmly on the longer-term.

An approach built around

individual needs

No two clients are the same. Therefore

retirement and family wealth transfer solutions

need to be built around their individual needs.

Compelling tax wrappers and investment

options are a key part of this.

Our fresh approach to tax planning can support

you to provide tailored solutions to each of

your clients – to help you to meet their financial

goals both now and in the future. We support

this approach by also offering you and your

clients great technology, tools, servicing

and support.

02 Introducing our fresh approach to tax planning


Helping you to demonstrate the value

of your advice to each of your clients

Based on your feedback, our knowledge of the

market and the changing financial landscape,

we’ve developed a fresh approach to tax

planning (visualised in the diagram below).

This is a holistic approach to tax planning which

considers Accumulation, Decumulation and

Family Wealth Transfer all together.

Instead of the traditional one-dimensional

approach to Accumulation – maxing out the

ISA, the Pension and then looking at Bonds and

other wrappers – we take a three dimensional

approach. We consider how the client is

likely to wish to take the money at retirement

(Decumulation) or pass it on (Family Wealth

Transfer) when Accumulation planning.

This helps you guide your clients towards a

more successful long-term financial outcome

whilst making the most of the short-term tax

benefits available. And we have the in-house

technical expertise, technology, servicing and

propositions to support it.

Please talk to your usual Standard Life

Account Manager for more information on

our three dimensional approach to tax planning

or visit our dedicated Tax Planning hub at

www.adviserzone.com/tax

And remember to follow us on Twitter

@sl_adviser

Other

Mutual funds

Bonds

Pension

ISA

ISA

ISA

MF

B

B

MF

MF

B

B

B

ISA

ISA

B

B

P

MF

MF

Succession planning

ISA MF

From age 75

Accumulation years Decumulation years Wealth Transfer

P

O

O

P

MF

P O

P

P

Helping you to demonstrate the value of your advice to each of your clients 03


Pensions opportunities for

your clients

Nothing stands still for long in the pensions’ environment. There are a number of things you should

be considering now for each of your clients. To help you, we have highlighted some of the key

issues below and how they may be affecting your clients now.

Carry Forward

HMRC recently changed its interpretation of how the pension Carry Forward rules apply to the tax

years before 2011/12. Overpayments above £50,000 for tax years 2009/10 or 2010/11 will no

longer be treated as negative amounts, eating into any unused annual pension allowance carried

forward from earlier years. The excess will simply be set to £0, meaning there is nothing to Carry

Forward from that year.

There is no change to the way excess provision in ‘intervening years’ from 2011/12 is treated.

Any excess for future years will still eat into unused annual pension allowance from earlier years.

Remember even if a client is already into their 2012/13 pension year, it isn’t too late to

sweep up any unused annual pension allowance for 2008/09 that may have previously

appeared unavailable under the old interpretation.

Old HMRC interpretation

Input year Input amount Unused allowance

to Carry Forward

Cumulative Carry

Forward available

2008/09 £0 £50,000 £50,000

2009/10 £0 £50,000 £100,000

2010/11 £150,000 £100,000 £0

New HMRC interpretation

Input year Input amount Unused allowance

to Carry Forward

Cumulative Carry

Forward available

2008/09 £0 £50,000 £50,000

2009/10 £0 £50,000 £100,000

2010/11 £150,000 £0 £100,000

04 Pensions opportunities for your clients


And there’s another opportunity…

Clients covered by the special rules for 2011/12

Pension Input Periods (PIPs) that started before

14/10/10 (called ‘straddling Pension Input

Periods’) could have paid up to £255,000 for

2011/12 and still have £150,000 allowance

available for 2012/13.

This clarification presents a great opportunity

for you to help your high net worth clients –

particularly those looking to boost their pension

before the Fixed Protection deadline in April

2012 or max out on 50% tax relief while it’s

still available.

¬ Clients subject to the straddling PIP rules can

have a total Pension Input of up to £255,000

for 2011/12 (including up to £50,000 made

after 13 October 2010) without facing an

annual allowance tax charge

¬ Crucially, HMRC has now confirmed that if

provision for 2011/12 is within these limits

it won’t eat into any unused allowance from

earlier years either

¬ And they’ll already be in their 2012/13 PIP, so

can take advantage of this opportunity now.

“Some of your clients may now have

more unused annual pension allowance

available than they previously thought –

it isn’t too late to help them to sweep up

this unused allowance.”

John Lawson – Head of Pension Policy at Standard Life.

Pensions opportunities for your clients 05


Example of how this might all

work in practice

Your client, Fiona’s employer made contributions of £20,000 to her SIPP for each of the 2009/10

and 2010/11 tax years. Then her company enjoyed a great trading year and decided to pay

£200,000 of their profits into her SIPP just before their accounting year ended in September 2010.

Fiona thought this had fully used up her allowance and she had nothing to Carry Forward.

But because her SIPP Pension Input Period (PIP) runs from 1 June each year, the £200,000

contribution is covered by the special straddling PIP rules and doesn’t eat into any unused

allowance from earlier years. So she still has £60,000 available from 2009/10 and 2010/11

to Carry Forward to 2012/13.

Input year Input amount Unused allowance

to Carry Forward

Cumulative Carry

Forward available

2009/10 £20,000 £30,000 £30,000

2010/11 £20,000 £30,000 £60,000

2011/12 £200,000 NIL £60,000

Tax years

2008/09

2009/10 2010/11 2011/12 2012/13

Pension

input

periods

+ payments

made

1st

June

}

£20,000

Employer

Payment

1st

June

}

£20,000

Employer

Payment

1st

June

}

£200,000

Employer

Payment

1st

June

£110,000 can

be paid before

6/4/2012

1st

June

1st

June

This means Fiona can get £110,000 into her SIPP before she registers for Fixed Protection.

We have created some more useful case studies which you can use directly with your clients.

See the pocket in the back of this folder for a copy. Further copies can be requested directly from

your usual Standard Life Account Manager or by visiting our Tax Planning hub

www.adviserzone.com/tax

06 Example of how this might all work in practice


Reduction in the Lifetime Allowance

– fixed protection

On 6 April 2012 the Lifetime Allowance will

reduce from £1.8m to £1.5m.

If you have any clients who expect to exceed

or already have pension savings above £1.5m

they must take action now. These clients will be

able to apply for a new personalised Lifetime

Allowance of £1.8m. Clients who want to use

this option must notify HMRC in writing by 5

April 2012 (using form AP55227 available on

the HMRC website).

Remember that the trade off to this kind of

protection is that these clients will have to stop

building up pension benefits in all registered

pension schemes from 6 April 2012. This only

leaves a short window to boost SIPP funding

before the shutters come down. And the new

pension funding rules are complicated for

clients to understand, so your advice will be

crucial to ensuring your clients make the most

of this opportunity.

We have produced client lists to help you easily

identify which clients may be impacted by this.

We have also produced a sample letter which

you may wish to use to write to these clients.

There are other ways that clients may choose to

lower their tax bill. Your clients could consider:

¬ Making financial gifts from surplus income

(including retirement income) as these gifts

could be exempt from IHT

¬ Making use of capital gains tax exemptions

by investing in Mutual Funds – currently

clients can withdraw up to £10,600 of capital

gains tax free

¬ Investing in Offshore Bonds. Each year 5%

of the original investment into an Offshore

Bond can be withdrawn tax free.

And remember to ensure that your clients have

used their full annual ISA allowance. See our

ISA opportunities section for more information

on how we can help you.

Pension Input Periods

The first PIP for a money purchase pension

arrangement starts when the first contribution

is paid to it after 5 April 2006. It normally ends

a year later. Your clients can change the PIP end

date to earlier than this if they wish.

Now is an excellent opportunity to review

your clients’ PIPs timings and ensure they are

working as efficiently as possible for each

of your clients. If you are advising a client to

change a PIP, the request to do so must be done

in writing.

Changes to how Protected

Rights work

The change in the existing rules means

that funds built up from protected rights

contributions can now be treated the same

as all other pension benefits. The restrictions

on the types of benefits these can be used to

provide will also be removed and Standard

Life will be updating all the scheme rules for

the pensions we are responsible for to remove

protected rights completely.

You may wish to take this opportunity to

review your clients’ protected rights funds and

consider:

¬ Are these contributions invested in the best

possible way

¬ Is your client’s existing provider updating

their rules. If they aren’t updating their rules

then your clients could still be restricted,

even after April 2012

¬ Whether your client might replace the

pension contributions that previously came

from contracting out rebates with voluntary

contributions

¬ Whether to consolidate funds in one

pension, particularly if transferring does

not involve a loss of guarantees or other

financial penalties.

Example of how this might all work in practice 07


ISA opportunities for your clients

Whether you’re doing all year round tax

planning or getting your clients ready for tax

year end, all clients can benefit from maximising

their ISA investments. We’ve built solutions to

help you – meaning you can easily complete

each of your client’s ISA applications whilst still

having the time to concentrate on really adding

value elsewhere.

Step 1 – Request your client data

If you’ve recommended a Standard Life ISA

(FundZone or Wrap) to your clients this tax year

or in the past three tax years, we now have your

ISA client data ready and waiting for you. And,

we will be updating this data again in March so

you can keep track of your clients’ progress.

Step 2 – Segmentation

Once you have a copy of your client lists, you

may choose to further refine your targeting

approach, focus your efforts and increase your

chances of having a successful tax year end.

Client segments you might consider

targeting are:

¬ Top up – clients with existing ISA

arrangements who need a reminder to

top-up before the tax year end

¬ No current ISA – clients who have had

an ISA previously but haven’t made any

arrangements this year

¬ Consolidation – clients with a range of ISAs

from previous tax years who could benefit

from the latest investment opportunities.

You could even prioritise your clients if you are

short of time or have a significant number of

clients to get through.

We have sample letters on our Tax Planning hub

to help you www.adviserzone.com/tax

“Continual changes in the pensions arena,

combined with the challenges of getting ready

for RDR, means that you are likely to have less

time available to deliver a robust ISA solution

for each of your clients – we have a simple

solution which can help.”

Ian Mobley – Regional Manager (Investment) at Standard Life.

08 ISA opportunities for your clients


Step 3 – Write to your target clients

If you’ve decided Standard Life is the right place

for your clients’ ISA investments, simply sign

them up today.

Wrap platform users – can simply go online and

follow the normal process.

FundZone platform users – we’ve produced a

short client guide to our MyFolio Funds and for

GARS. This means you can simply select which

fund(s) are most appropriate for each of your

clients and send them the most up to date

information, along with the Key Features and

Application Form.

Please also see our enclosed adviser booklet on

Investments for more information when making

your investment decision – this booklet is

available in the back pocket of this pack and on

our Tax Planning hub www.adviserzone.com/tax

If you are using our FundZone platform,

to make things easier for you, we’ve also

produced a streamlined Application Form

and Key Features document to support this

process which you can either download from

our Tax Planning hub www.adviserzone.com/tax

or request hard copies by contacting your usual

Standard Life Account Manager.

What next

Contact your usual Standard Life Account

Manager for copies of your client lists, and

for FundZone, printed copies of our All-in-One

ISA packs.

ISA opportunities for your clients 09


Offshore Bond opportunities

for your clients

Pension accumulation alternative

for high earners

In response to the changes in pension

legislation, Offshore Bonds offer highearners

an attractive and flexible retirement

accumulation solution:

¬ Tax efficiency – your clients won’t normally

pay tax on investment growth

¬ Fair charges – with the Offshore Bond from

Standard Life International, clients only

pay for the features they use. There are no

hidden charges, giving your clients a fair deal

and value for money

¬ Unlimited contributions – making Offshore

Bonds an option for those clients wishing

to contribute significant amounts towards

retirement funding

¬ Payment flexibility – the Standard Life

International Offshore Bond offers both lump

sum or recurrent single payments. Recurrent

single payments are totally flexible and can

be added to existing single payment bonds

¬ Investment choice – the Offshore Bond from

Standard life International offers your clients

a wide range of funds, a selection of deposit

accounts & structured deposits and a panel

of Discretionary Investment Managers.

“Since the reduction in the pension annual

allowance from £255,000 to £50,000 high

earning clients are now looking around for

tax efficient retirement saving alternatives.

Offshore Bonds are an option which can

provide your clients with a highly tax efficient

alternative. Offshore Bonds offer your clients

flexibility and choice when it comes to

investing, taking the money out and passing

it on.”

Ian Searle – International Business Development Manager at Standard Life International.

10 Offshore Bond opportunities for your clients


Example of how this might work

in practice

Steve is 57 and, as CEO of an engineering

business, is used to making financial decisions.

He is very focused on accumulating as large a

retirement fund as possible. So he has typically

contributed £3,500 each month to a SIPP.

More recently he has also made lump sum

contributions to the SIPP of around £35,000

from his annual company bonus. In response to

the revised pension contribution limits, Steve

may simply restrict his pension contributions

without considering other tax efficient

accumulation options.

However, Steve could continue to accumulate

the same level of funds using an Offshore Bond

e.g. he could continue to contribute £3,500 to

the SIPP each month together with a smaller

lump sum of £8,000. He could then invest

the remaining lump sum of £27,000 into an

Offshore Bond. Should he wish to increase his

accumulation in the future, he could do so via

lump sum or recurring lump sum payments into

the Offshore Bond.

Family Wealth Transfer and

IHT Planning

An Offshore Bond can be used with a range of

Family Wealth Transfer solutions:

¬ Family Wealth Transfer is all about planning

your clients’ finances and providing guidance

on how to protect their assets both now and

in the future. Whether your client wants to

protect their pension benefits or is setting

up a trust to hold an Offshore Bond, trust

solutions are an important tool in protecting

your clients’ assets. Trusts can provide

flexibility, control and tax efficiency

¬ Segmentation and assignment – the Bond

can be split into segments. The Bond owner

can choose to assign segments to third

parties who may be in a lower tax bracket.

These third parties may then elect their own

investment and withdrawal strategy.

Flexible and Inheritance Tax (IHT)

efficient decumulation

An Offshore Bond also offers an exceptional

level of flexibility and control when it comes to

withdrawing money:

¬ Flexible withdrawal – increase/decrease

amounts as required

¬ Tax control – each year your client can

withdraw up to 5% of the value of payments

made without an immediate tax liability.

Any unused allowance can be carried forward

¬ Early withdrawal – your client can make

withdrawals before the current pension age

of 55

¬ IHT efficient – initial withdrawal from the

Offshore Bond allows clients to leave their

pension fund invested (uncrystallised) and

therefore remain IHT exempt.

Offshore Bond opportunities for your clients 11


Ways we can help you right now

We hope that you’ve found our fresh approach

to tax planning guide useful and a practical

solution to helping your clients now and into

the new tax year.

Sales aids to help you bring value

to your clients

Inside the back cover of this booklet and

available on our Tax Planning hub, you’ll find a

suite of client-facing materials. These can help

you maximise the tax planning opportunities

available right now including client facing case

studies which set out clear strategies for making

the most of the changing allowances and tax

legislation – now and for the long-term.

There is a copy of each of the sales aids with

this booklet. Further copies can be obtained

by contacting your usual Standard Life Account

Manager or by visiting our dedicated Tax

Planning hub at www.adviserzone.com/tax

Support and service when you

need it most

By visiting our Tax Planning hub you’ll also

discover new content and tools, specifically

designed to help you to realise the true

potential of our fresh approach with your clients

– including expert videos, technical briefings

and tools.

And, as you would expect, your usual Standard

Life Account Manager, supported by our

experienced team at Standard Life, is always

available and ready to offer you all the service

and support you need to make the most of the

current tax planning opportunities and our

fresh approach.

Because your clients need flexible tax planning

to keep their plans on course, when life

changes course.

12 Ways we can help you right now


For more information or to request copies of any of our enclosed support

material please either contact your usual Standard Life Account Manager

or visit

www.adviserzone.com/tax

And don’t forget to follow us on twitter

@sl_adviser


Pensions Savings Investments Insurance

Find out more

Contact your usual Standard Life Account Manager today or visit

www.adviserzone.com/tax

or follow us on Twitter @sl_adviser

Standard Life Savings Limited, registered in Scotland (SC180203) is provider of the Wrap Platform,

Wrap Personal Portfolio, Wrap ISA, Fundzone Platform, ISA and Investment Fund.

Standard Life Assurance Limited, registered in Scotland (SC286833) is the provider of the Onshore Bond

for Wrap and the Standard Life Self Invested Personal Pension Scheme.

Standard Life Trustee Company Limited, registered in Scotland (SC076046) is trustee of the Standard Life

Self Invested Personal Pension Scheme.

The registered office of each company is at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.

Standard Life Savings Limited and Standard Life Assurance Limited are authorised and regulated by the

Financial Services Authority.

Standard Life International Limited, registered in Ireland (number 408507) is the provider of the Wrap International

Portfolio Bond. Its registered office is at 90 St Stephen’s Green, Dublin 2.

Standard Life International Limited is authorised and regulated by the Central Bank of Ireland and subject to limited

regulation by the Financial Services Authority. Details about the extent of our regulation by the Financial Services

Authority are available from us on request.

www.slinternational.ie

Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary.

www.standardlife.co.uk

TYE 10 0212 © 2012 Standard Life, images reproduced under licence.

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