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Retirement Account and intergenerational planning

Helping your clients secure their families’ financial future

The financial challenges facing different generations of UK families means intergenerational planning is more complex than it used to be.

With pension freedoms giving clients the ability to pass wealth on during their lifetime, this means that pensions can play their part as a useful estate planning tool.

However, to do this successfully, you’ll need to ensure your client has the most appropriate pension plan in place.

  • One that meets their current and likely future retirement needs
  • But also lets them make the most of pension freedoms from an estate planning perspective.

This is where Scottish Widows Retirement Account comes in.

  • Offering income and investment options that can meet your clients’ needs to and through retirement
  • Allowing them to pass any remaining pension savings onto beneficiaries in a tax efficient manner, who then have a choice of options as to how to take these savings.

Retirement Account – ticking all the boxes

✔ FLEXI-ACCESS DRAWDOWN

  • Retirement Account offers flexi-access drawdown, which allows your clients’ pension savings to remain and potentially grow in a tax free environment, with the ability to take a taxable income as and when they need it (from age 55).
  • This allows clients to use their pension savings to help an adult child or a grandchild from birth. This could help pay for further education costs or provide a deposit for a first home.
  • And rather than being restricted by the £3,000 gifting limit, up to £40,000 could be placed into a pension for a child or grandchild (accessible from age 55).

✔ FLEXIBLE DEATH BENEFITS

  • With Defined Benefit pensions, death benefits are normally in the form of a dependant’s pension that cannot be passed on once the dependant dies.
  • With Retirement Account, a dependant can take any remaining pension savings as a lump sum, to use for income drawdown or to buy an annuity. And these can be passed on again to another dependant or successor.

✔ BENEFICIARY AND SUCCESSOR DRAWDOWN

  • The ability to pass unused savings onto a chosen beneficiary makes beneficiary drawdown an appealing option.
  • If the client dies before 75, the remaining pension savings can be paid to beneficiaries’ tax free.
  • If they die after age 75, the proceeds will be taxable at the dependant or beneficiary’s marginal rate. Here, beneficiary drawdown can provide a more tax-efficient option than a lump sum payment, as tax is spread over a number of years.
  • Clients can choose their beneficiary (it doesn’t need to be a dependant) and this nominated beneficiary can nominate their own beneficiary, known as the successor.
  • With drawdown, there is in theory no end to this passing of wealth – a successor can pass their remaining pension savings down to another successor, and so on until they are exhausted. Any undrawn savings will remain within the IHT-efficient pension wrapper.

✔ TRANSFERRING IN – DRAWDOWN TO DRAWDOWN TRANSFERS

  • Retirement Account can also accept drawdown-to-drawdown transfers from another provider.
  • This includes capped drawdown transfers – so your clients could transfer and switch to flexible drawdown at any time.
  • We can also accommodate transfers from beneficiary and successor drawdown.

✔ RETIREMENT PORTFOLIO FUNDS (RPF)

  • Clients still require investment growth in drawdown coupled with the reassurance their income has the potential to last as long as needed (especially important if they’ve gifted wealth away).
  • Our competitively priced Retirement Portfolio Funds (RPF’s) (0.2% Total Annual Fund Charge) can help mitigate the risks faced by drawdown investors (notably sequence risk) and deliver an opportunity for long term growth and sustainable income withdrawals.
  • The RPF’s do this by utilising our innovative Dynamic Volatility Management process to manage significant volatility with the aim of helping a pension pot to last longer.
  • These funds form part of our competitively priced core portfolio fund ranges which have Total Annual Fund Charges of 0.1%, 0.2% and 0.4%.

✔ DRIP FEED DRAWDOWN

  • Our automated phased drawdown option allows you to easily set up a way for your clients to take the optimal amount of tax-free cash each time they take an amount of regular income.
  • This can help control the tax liability on each income withdrawal they make in retirement and manage their tax affairs efficiently.
  • By taking the optimum amount of income in the most tax-efficient way, as and when it’s needed, the remaining retirement fund has the potential to grow, and clients have the opportunity to accumulate further tax-free cash.

For more information on how Retirement Account can help your clients with intergenerational planning contact your account manager at Scottish Widows
Or, visit www.scottishwidows.co.uk/retirement-account
Or, call 0800 096 4364

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This information is for UK financial adviser use only and should not be distributed to or relied upon by any other person.