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Family features

The arrival of a provider of the magnitude of Axa Winterthur into the family Sipp sector looks certain to catch the eye of IFAs keen to give clients an advice-rich experience. Clients wanting to reduce their inheritance tax bill will also find the concept appealing.

Existing players Rowanmoor Pensions and Hornbuckle Mitchell have been offering something similar for some time now but the launch of Axa Winterthur’s Family Suntrust, offering the best of Sipp and SSAS functionality to families as well as groups of individuals not related by blood, is bound to add credence to an area of advice that some advisers have hitherto been wary of.

From a marketing point of view, the product has several features that will make selling the concept to the right sorts of clients straightforward. Prominent among these are the avoidance of annuity purchase and the mitigation of tax, particularly that most emotive of taxes, IHT.

The ability to pay a scheme pension not only allows greater flexibility on withdrawals over Sipp in the pre-age 75 phase but after 75 as well. With GAD rates coming down, drawdown is becoming more restrictive but scheme pension remains at the discretion of actuaries.

Someone in a Sipp may be able to get a 10-year guarantee on an annuity at age 75 that will manage to draw around 85 per cent of the remaining fund out of the ASP tax trap but a 10-year fixed income from a scheme pension through a family Sipp may manage 100 per cent. Scheme pension is not obligatory and if people want to, they can use unsecured pension and alternatively secured pension options instead.

The Family Suntrust, named in recognition of the Sun Life brand, also offers efficient pooled investment options that will appeal to family businesses where two or even three generations want to hold the company premises together, as do the Rowanmoor and Hornbuckle family offerings.

The advantage over the traditional Sipp or group Sipp is the fact that the family Sipp has its own trust, meaning that formal conveyancing transactions are not required for ownership of any premises to be changed. The advantage over the SSAS, which also has this functionality, is that the family Sipp is cheaper for reporting and valuation expenses. But it is the ability to “allocate disproportionately” that will be particularly attractive to advisers. This means that, in certain circumstances, after certain periods, investment growth can be apportioned to other members of the family Sipp such as children or grandchildren.

Advisers who have until now been wary about using this feature of the family Sipps on offer from smaller providers may be comforted in doing so now that a provider of Axa’s size is offering such an option.

Axa has got a massive brand to worry about, which is why it would be astonishing if correct use of disproportionate allocation were found to be in any way in breach of the law as it is written today. As for Rowanmoor and Hornbuckle, far from pinching business from them, I would predict that the arrival of Axa Winterthur on the scene is likely to grow the market as a whole.

This launch is bound to cause a stir. Other big Sipp providers will doubtless highlight its weaknesses and costs and point out that this is a product that is only suitable for certain types of client. But the impression I get is that most IFAs will welcome a player of the size of Axa Winterthur giving its seal of approval to a product of this sort.

John Greenwood is editor of Corporate Adviser

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