Drawdown due diligence

Transcription

1 Drawdown due diligence Adviser considerations 30 March, 2017

2 Looking beyond just product features and price. Do you have the right platform or pension provider in place to meet your client s needs in drawdown? Now could be the time for a closer look at your drawdown provider Pensions must now be able to see a client through their entire retirement, reliably providing access to capital, day-to-day income and serving other investment goals such as preserving capital for inheritance. This is an entirely different challenge to the accumulation phase that most pensions were designed for. Simply rolling over into drawdown with an existing pension provider or platform could well leave clients with an unsatisfactory experience. Increased reliance on drawdown following the increase of Pension Freedoms We predict that the market for drawdown will increase five fold from pre Pension Freedoms. This means that a provider who previously managed a small number of drawdown clients as a niche service will feel growing pressure as the number of clients in drawdown rapidly multiplies. Advisers should satisfy themselves as to the appropriateness of this document for their purposes. No responsibility is accepted by Standard life for any problems caused by reliance on, or use of, this document. 2 Drawdown due diligence: Adviser considerations

3 The steps to drawdown due diligence Our guidelines for approaching platform due diligence can equally be applied to choosing the right drawdown provider. The diagram below outlines the steps we believe you should take to ensure you choose a suitable solution to meet the needs of your clients. Evidence clear segmentation of your client bank Match your service proposition to each client segment Initial shortlist of market using identified key metrics Thoroughly document thought process and rationale for selecting a provider Refine initial shortlist by functionality required to deliver client in retirement proposition. Rate the must have and nice to have features Drawdown due diligence: Adviser considerations 3

4 Our balanced scorecard As the UK s no.1 drawdown provider, we have a good idea of what it takes to run a drawdown service at scale. We think that this goes a long way beyond just a comparison of product features and price, which is why we talk about a balanced scorecard approach. The three areas in our example scorecard cover financial strength and scale, operational capability, and functionality and flexibility. The diagram below breaks these down further, highlighting some of the key factors we believe need to be considered when evaluating a drawdown provider. The end goal of course is to show that you and your clients can rely on this being the right choice in the long-term. Financial strength and scale Continued investment and innovation Scalability Responsiveness to regulatory change Sustainability within the market Functionality Availability of drawdown options Product features Flexibility of income payments Operational capability Timely access to capital and day-to-day income Efficient and scalable processes Reliable service Digital service capability 4 Drawdown due diligence: Adviser considerations

5 Spotlight on: Why is it important? Questions that we hear advisers asking Financial strength and scale Functionality and flexibility Operational capability The scale and efficiency of your chosen provider will be important in helping your business to meet the increased demands involved in effectively managing clients in retirement. Providers with a strong financial position can afford to continually reinvest in their processing capability and proposition development. A provider should be: Committed to the market Able to enhance, improve, evolve Able to respond quickly to regulatory change Whether it s the ability to access a full suite of drawdown options or to amend the date or frequency of income payments, your chosen provider should be able to help you meet the needs of your clients. You should look for: Availability of drawdown options Product features Flexibility of income payments Understandably, clients in retirement may place a greater demand on both advice and service. They need reliable access to capital and day-to-day income, so often what you can t see (the engine room operation) is most important when it comes to choosing a drawdown provider. You need a provider with: Efficient and scalable processes Reliable service Telephone and online service capability Commitment to their service levels How many drawdown customers do you administer where benefits are already being taken? What are the total assets under management associated with these customers? Can you demonstrate the sustainability of your business? Can you provide evidence of your ability to respond rapidly to regulatory or taxation changes? What is your Proposition Development Roadmap? Will you ensure that drawdown income is always paid? Which drawdown options are currently offered? Is there a charge for moving into drawdown? Is there a charge for moving from capped to flexi-access drawdown? Are there any charges for changing the income level? Do you offer continued support for Capped Drawdown? Can a client s capped drawdown income level be reviewed outside the statutory three-year GAD review period? What flexibility is there around the payment of drawdown income? Is there an exit charge applied on transfer to another drawdown provider? What tools are available to help with tax planning? Do you offer the ability to select multiple models for a client? What options are available for taking an Adviser Charge? What are your service level agreements for paying tax-free lump sums, change of income and making an ad hoc payment? Do you provide clients with payslips/income statements? Do you pay income net of basic rate income tax? What drawdown details can be viewed online? Give details of your telephone and online support services Can you demonstrate recognition for the quality of your proposition? What technical support is available for advisers? Drawdown due diligence: Adviser considerations 5

6 Drawdown due diligence in practice We ve included an illustration below to bring to life what Standard Life s responses would look like. We think this starts to show how powerful these questions can be in identifying provider expertise. Financial strength and scale Example questions How many drawdown customers do you administer? Standard Life answers* We currently administer over *86,000 drawdown policies. This makes us the market leader in this space, and proves we have the capacity to deal with demand What are the total assets under management associated with these customers? We currently have over * 16.3Bn AUA associated with these customers Can you demonstrate the sustainability of your business? Can you provide evidence of your ability to respond rapidly to regulatory or taxation changes? The continued growth in our AUA and operating profit demonstrates the long term sustainability of our business In our 2016 FY results, group assets under administration increased by 16% to 357.1bn, whilst our group operating profit before tax increased by 9% to 723m Following the acquisition of Elevate, our Retail business now supports over 3,000 adviser businesses with total platform AUA of 44.2bn. Track record of applying GAD changes Early implementation of RDR Removal of rebates in advance of deadline date Full Pension Freedom functionality available from 06/04/2015 *All figures correct as at 31 December 2016 Functionality and flexibility Example questions Which drawdown options are currently offered? Is there a charge for moving into drawdown? Standard Life answers* We currently offer the full suite of drawdown options for both Capped and Flex-access drawdown. We launched our Tailored drawdown proposition in 2015, which facilitates the full flexiblity available under Pension Freedoms. No Is there a charge for moving from capped to flexi-access drawdown? No Are there any charges for changing the income level? No Do you offer continued support for Capped drawdown? Yes, existing and new customers who are already in Capped drawdown can continue in this way with our products. There are significant tax planning consequences of moving from Capped drawdown to flexi-access and as a result we would never force this decision 6 Drawdown due diligence: Adviser considerations

7 Functionality and flexibility (cont.) Example questions Can a client s capped drawdown income level be reviewed outside the statutory three-year GAD review period? Standard Life answers* Yes What flexibility is there around the payment of drawdown income? No minimum withdrawals Ad hoc payments and tax-free lump sums are normally paid out within five days of request no need to wait a month for access Choose most suitable day for income payments (1st to 28th day), choose frequency (monthly, quarterly, half-yearly or yearly). We can also pay termly (every 4 months). Is there an exit charge applied on transfer to another drawdown provider? No charge will be applied on the Standard Life Product What tools are available to help with tax planning? We have introduced our Income Withdrawal Optimiser Tool which can be used by advisers to determine the most tax efficient methods of withdrawing funds across a series of tax wrappers. With effect from 6 April 2017 this includes the ability to reflect both UK and Scottish specific taxation Do you offer the ability to select multiple models for a client? Yes, this can be achieved by using our innovative Investment Hub What options are available for taking an Adviser Charge? Full suite of adviser charge options available on our SIPP contracts, including Drawdown Initial and Adhoc charges, which ensure that paying for advice in retirement can be done flexibly and at any point. * All figures correct as at 31 December 2016 Drawdown due diligence: Adviser considerations 7

8 Operational capability Example questions What are your service level agreements for paying tax-free lump sums, change of income and making an ad hoc payment? Standard Life answers* Ad hoc payments and tax-free lump sums are normally paid out within five days of request. No need to wait a month for access Do you provide clients with payslips/ income statements? Yes Do you pay income net of income tax? What drawdown details can be viewed online? Give details of your telephone and online support services Can you demonstrate recognition for the quality of your proposition? What technical support is available for advisers? Yes - where we have the customers tax code we use this immediately. Where we don t, we work with HMRC to get the correct tax code. On Adviserzone retail advisers can see: Overview of pre-drawdown funds The value of funds in drawdown Investments in drawdown Lifetime Allowance used (%) Drawdown income paid (frequency, payment date) Yearly HMRC maximum income GAD reviews` You can also request a bulk data download On our platform, Wrap advisers can check: Value of funds in drawdown Value of total income (tax-free and taxable) Remaining tax-free cash available Income frequency Tax code applicable Dedicated UK-based service experts Dedicated online support Schroders UK Platform Awards Platform of the year 2014 and 2015 Best platform provider (AUM over 15 billion) 2014, 2015 and 2016 Best platform for Adviser service 2015 Best use of platform technology with FNZ for the Investment Management 2015 Defaqto Gold Service Award for platform service and administration 2016 We have a team of experts, qualified in pensions, taxation, trusts and wealth transfer, who are on hand to help advisers with their technical questions. In addition, we have a dedicated online resource - Techzone - available 24/7 which has a wealth of articles, blogs, case studies and briefing cards. For further information Visit: Standard Life Savings Limited, registered in Scotland (SC180203) is provider of the Wrap Platform. Standard Life Assurance Limited, registered in Scotland (SC286833) is the provider of 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 is authorised and regulated by the Financial Conduct Authority. Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. WRAP Standard Life, images reproduced under licence.