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Pensions drawdown underpin

Pensions drawdown underpin. January 2014. Consistent approach to planning. Consider you have a client with a large fund subject to IHT at 40%* Would you use a Whole of Life plan to cover the charge?

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Pensions drawdown underpin

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  1. Pensions drawdown underpin January 2014

  2. Consistent approach to planning • Consider you have a client with a large fund subject to IHT at 40%* • Would you use a Whole of Life plan to cover the charge? • Now assume you have a client with a very large pension fund, and for all the right reasons you recommend pensions drawdown. • In the future, the member (and their spouse) will die, then the fund in drawdown will be subject to tax at the 55% recovery charge • Do you protect that charge? *if death estate (including any assets held in trust and substantial gifts made within seven years of death) is over the threshold, IHT will be due at 40%. As from 6 April 2012, people who leave 10% or more of their net estate to charity can choose a reduced rate of IHT at 36%.

  3. Income drawdown underpin example Client aged 60 with a spouse three years younger Gross designation £600,000PCLS £150,0000Income Drawdown fund £450,000Max GAD £28,620 (Government Actuarial Department)Annual income required: £20,000Quote assumes 2% initial commission and 0.5% trail feePruFunds used 1.45% annual management charge3% gilt yield7% investment return Figures supplied by Prudential and are based on the Drawdown Plan For illustrative purposes only

  4. Drawdown example (no underpin) Male draws down £20,000 each year – dies aged 78 Figures supplied by Prudential and are based on the Drawdown Plan For illustrative purposes only

  5. Options for the spouse 1st death 2nd death Estate Ceases

  6. Income drawdown – no underpin Spouse aged 75 - takes income drawdownDesignation £524,000Continues to take income withdrawal of £20,000paDies aged 82 Fund on death £593,000 Less 55% tax £326,150 Net Fund £266,850 Adviser fee £9000 Figures supplied by Prudential and are based on the Drawdown Plan For illustrative purposes only

  7. With Whole of Life underpin (Vitality Optimiser premiums) Based on Vitality Optimiser premiums Bronze status achieved each year Premium added to level income £20,000 Adviser Earnings Fee £9,000 Commission £3,831 TOTAL £12,831 Fund on Death £464,000 Less 55% tax £255,200 Net fund £208,800 Plus WoL plan £247,500 Total Payable £456,300 Figures supplied by Prudential with PruProtect premiums added and are based on the Drawdown Plan For illustrative purposes only

  8. Without Underpin Annual income £20,000 Fund on 2nd death £593,000 Less 55% tax £326,150 Net Value £266,850 Adviser Fee Initial £9,000 + 0.5% trail With Underpin Annual income £20,000 Fund 0n 2nd death £464,000 Less 55% tax £255,200 Net Value £208,800 WoL payout £247,500 Total payout £456,300 Adviser Fee Initial £9,000 WoL commission £3,831 Total initial £12,831 + 0.5% trail Comparing Benefits Figures supplied by Prudential with PruProtect premiums added and are based on the Drawdown Plan For illustrative purposes only

  9. Why Drawdown Underpin • Same level of income taken by members • Over 30% more income for the adviser • Significantly more death benefits available to beneficiaries

  10. How long to be worse off under Vitality Optimiser Joint life 2nd Death WOL guaranteed premium Life cover: £247,500 Essentials premium: £2,718.36 Optimiser premium: £2,100.12 Figures rounded to nearest £ Based on PruProtect premiums, 2013 For illustrative purposes only Optimiser premium (less £3 monthly fee- which is subject to change) changes each year on a guaranteed basis dependent on Vitality status: Bronze: 2% Silver: 1% Gold: No change Platinum: 1% reduction Premium charges apply up to the plan anniversary immediately prior to the youngest policyholder’s 80th birthday. Premiums remain level thereafter.

  11. Drawdown underpin – level vs VO premiums Joint life 2nd death (spouse 3 years younger) Essentials WOL Premiums Level VO Comparison of first year premiums only Based on PruProtect premiums, 2013 For illustrative purposes only

  12. Vitality Optimiser Immediateincentives and rewards Creating a new generation of protection Up to 40% discount in first year* Integrated health and wellness programme built into protection 3 4 2 1 Vitality Plus rewards automatically included** A scientific foundation to encourage and reward healthy living Premiums can change each year depending on engagement A fair approach to risk Regularbehavioural nudges Cashback every year *compared to our standard protection premium **as part of the £3 fee with Vitality Plus benefit

  13. Cashback every year A protection industry first SILVER GOLD PLATINUM An extra incentive to be healthy £50 £75 £100 Single life policy £100 £150 £200 Joint life policy If you’ve done enough to look after your health by the end of each year, we will send you cash back to reward you for your efforts Double Cashback for PruProtect and PruHealth members: £100 £150 £200 Single life policy £200 £300 £400 Joint life policy Any cashback we give you may be subject to tax. This might affect your personal tax position. If you have any questions about this, please contact a Financial Adviser or HM Revenue & Customs (hmrc.gov.uk).

  14. Vitality optimiser benefits 50% off Up to 75% off And more discounts Vitality Plus benefits* included: Anintegratedhealth and wellness programme A platform to engage, improve health and get benefits Free cinema ticket each week 50% off monthly gym membership And more… Vitality Plus £3 per month *Terms and conditions apply

  15. Attends Nuffield 360+ Health Assessment • 50% off cost • Full price £682 reduced to £341 • Boosts members vitality points • Tests include • See doctor and physiologist • Cholesterol tests • Full blood works • Body composition • Spinal assessment • Active cardiovascular tests - ECG Figures correct as at 01/2014

  16. Better planning, enhanced security, more engagement Results • Health Screen included Prostate Specific Antigen (PSA) and the results were slightly raised indicating the need for further tests. • A Biopsy confirmed early stages of Prostate Cancer • Early treatment can now be started (and has a much better chance of success) • If he had Serious Illness Cover with Pruprotect a payment would be made • He can also consider securing a higher level of income by looking at enhanced life annuities as a further planning option Better planning, enhanced security, more engagement

  17. Why you should consider Wealth Preservation: Good for you, good for your clients • Enhanced client proposition • Enhanced client security and peace of mind • Enhanced revenue per client • Enhanced cash-flow • Enhanced embedded value of your business • Reduced consumer risks within the business • No longer an “average” wealth adviser

  18. PruProtect – providing in depth support

  19. Thank you

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