Delta and Premiere Discounted Trust Accounts

Transcription

1 INVESTMENTS PENSIONS INTERNATIONAL ESTATE PLANNING Delta and Premiere Discounted Trust Accounts Adviser Guide Tax efficient investing for your clients' future

2 Contents Support for you page 3 Introduction page 5 Two Account options, two investment choices page 5 Funds page 6 Transferring existing assets page 8 Withdrawals and surrenders page 8 Adviser charge deductions page 9 Death benefit page 10 Tax page 10 Service charter page 12 Account structure page 12 Charges page 14 Forms page 15 New business requirements page 15 Contact information page 16

3 Support for you Strength and stability We understand that you would want reassurance that the company your clients are investing with is strong, safe and secure. As part of the Great-West Lifeco group, we are a constituent of the Financial Times Global 500 world s largest companies and with combined assets under administration of more than 767 billion (as at 1/1/18), we have an even stronger platform for continued growth as a world-class financial services provider. Ratings are another reflection of our financial strength and Great-West and its subsidiaries have received strong ratings from the major ratings agencies. As they can change over time, you can view our latest ratings on the About us part of our dedicated adviser website AKG is an actuarial consultancy specialising in the provision of information and market assistance to the financial services industry. Each year, AKG visit the head offices of every major insurer that operates in an offshore jurisdiction to evaluate their strength, solvency, business processes and practices. The latest report, for 2016, reaffirmed that we are a key player in the offshore investment market and remain amongst the leading offshore providers; we are the only offshore insurer to have maintained an overall 5-star Annual Review rating for the fourteenth consecutive year. Established over 30 years ago Canada Life International Limited (CLI) remains amongst the leading offshore providers, with assets under administration of 14.6bn (30 June 2017). Through CLI Institutional Limited, institutional and ultra high net worth clients can obtain a level of policyholder protection that is not otherwise currently available in the offshore UK market. Canada Life International Assurance (Ireland) based in Dublin, launched in 2013 so now UK investors have a choice of three top quality five-star AKG rated companies, two jurisdictions and one compelling offshore proposition. We are a founder member of the Association of International Life Offices (AILO), a group of offshore companies supplying insurance and investment services in many areas of the world. Canada Life International Assurance (Ireland) DAC (CLIAI), based in Dublin, was established in 2007 and joined the Canada Life group in Service charter We know how important good service is to you and your client and to illustrate our commitment to service excellence for our offshore bond range, we have introduced high service standards and non-performance penalties; if we don t keep our promises, we will pay you. Full details of our performance standards can be found on the About us part of our website. Dedicated support As well as having your own dedicated account manager to help support you and your clients, our Adviser Support Team is there to help with any day-to-day queries, literature requests and producing personal illustrations. You can contact the Adviser Support Team direct on +44 (0) or by at focus@canadalifeint.com Delta and Premiere Discounted Trust Accounts Adviser Guide 3

4 Technical expertise and information In addition to your dedicated account manager, you also have access to our Technical Services Team consisting of industry specialists, experienced in the fields of investments, taxation, trusts, pensions and estate planning. Every individual within our Technical Services Team understands that you have specific needs; you want the right technical information for you, delivered in the right way, at the right time. The team includes field-based Tax and Estate Planning Consultants, and Technical Managers based in our head office. They work with professional advisers on wide-ranging issues, from the straightforward to the highly complex, and are also available to assist with client cases, training and seminar activities. In the first instance, contact your local account manager for support. Alternatively, contact the Technical Services Team: +44 (0) Investment Planner Accessed via our website, Investment Planner enables you to create investment strategies for your clients and select appropriate products and funds. Unlike traditional systems, Investment Planner incorporates portfolio x-ray, goal setting, risk profiling, asset allocation, forecasting and portfolio construction into a single process, giving you a consistent and seamless approach to creating an investment plan. The result is that high quality, professional investment plans and recommendations are created quickly and easily. Policyholder protection Policyholders of Canada Life International Limited (CLI) policies will be protected by the Isle of Man Life Assurance (Compensation of Policyholders) Regulations 1991 if the company becomes unable to meet its responsibilities to them. WINNER BEST INTERNATIONAL PORTFOLIO BOND 4 Delta and Premiere Discounted Trust Accounts Adviser Guide

5 Introduction Throughout life, the financial needs and goals of your clients will change. Our offshore Accounts have been created to make sure they can adapt to the changing goals of clients and put them in control whether their strategy is to create, enhance, distribute or protect their wealth. Your clients may have built up substantial wealth during their lives and their plans will probably include the desire to pass on as much of that wealth as possible to their children or grandchildren. Inheritance tax (IHT) can seriously reduce the level of wealth that is passed on to further generations of family so a way to reduce potential IHT liability should be considered. Many means of mitigating IHT prevent the individual who made the gift from benefiting further. Not every individual can afford to do this so our Discounted Trust Accounts have been specially designed to allow your clients to pass assets to their heirs and mitigate IHT whilst continuing to take income from their investments. The Discounted Trust Account can use a bare or discretionary basis. The Discounted Trust Account may be suitable for investors seeking to: Reduce or mitigate inheritance tax Continue to receive an income from capital Retain an element of control over the destiny of capital There are a wide range of investment opportunities available allowing you to create a tailored portfolio to suit your client s financial goals and their attitude to risk. You can also free yourself from the administrative burden of managing portfolios and our commitment to service excellence means that you can be confident that we always put your client first. Two Account options, two investment choices Our single premium investment policies combine simplicity in their structure with clarity in their charges. Both Accounts are single premium whole of life assurance policies. Delta Discounted Trust Account The Delta Discounted Trust Account has been designed as a tax efficient vehicle through which clients and trustees have the potential for capital growth and a regular income. The Delta Discounted Trust Account allows clients and trustees to invest into CLl s internal Core fund range enabling the underlying funds in the Account to grow virtually free of tax. The minimum investment is 25,000. Premiere Discounted Trust Account The Premiere Discounted Trust Account has been designed to take offshore policies a stage further by allowing clients to invest into our Open investment range providing access to any authorised collective investment vehicle or permissible asset, allowing you to create a tailored portfolio to suit their attitude to risk. The minimum investment is 50,000. Unless specified, the explanations and notes within this guide apply to both Accounts. Where the Accounts have unique features we have made these clear. Delta and Premiere Discounted Trust Accounts Adviser Guide 5

6 Funds The value of a Bond can go down as well as up and your client may get back less than they invested. The amount a client gets back will depend on the performance of the funds chosen, how long they invest for, charges and any withdrawals (including any ongoing adviser charges) taken from the Account. Fund choice The Accounts provide you with a wealth of investment options to construct a portfolio of funds tailored to the investment objectives and risk attitude of your clients. We have been working in close partnership with some of the world s biggest and best fund managers for over twenty years. These long standing relationships allow us to pass on the preferential discounted terms offered by our investment partners to you or your clients. Furthermore, your clients will have access to funds at a level not normally available to retail investors. Canada Life Investments Our London-based, award-winning Investments team have been managing assets for over 40 years and are responsible for over 30 billion (as at 31 December 2013). Backed by our Canadian parent, Great-West Lifeco Inc, we provide access to leading investment specialists within the group through our Global Partner Series of funds. Each of the Accounts offers access to a different fund universe, summarised below. For more detailed information about our fund ranges, please read Your guide to investment funds (reference 6815), available on our website. Delta Discounted Trust Account the Core investment range The Core fund range provides access to a carefully selected range of more than 150 internal funds managed by some of the world s best investment groups and boutiques. Using our institutional relationships, we can offer access to the funds on preferential terms. Up to 10 funds can be held at one time. Premiere Discounted Trust Account the Open investment range With thousands of funds available, the Open investment range is very much determined by what we (as a registered Isle of Man Insurance Company) are permitted to hold as an asset as part of our long term business fund, on behalf of your clients. Our dedicated Investment Governance team will assist you in checking whether any proposed funds fall within the permissible assets rules which can include investments such as bank accounts, hedge funds and exchange traded funds. Choosing the Premiere Discounted Trust Account with access to the Open investment range ensures that you have the widest possible range of investment funds to choose from. Furthermore, if the investment fund chosen sits on our Core plus menu, then your client, fund adviser and/or your firm can benefit from the rebates we have negotiated. Investing in the Open investment range also provides your client with the opportunity to appoint their own discretionary manager. There is no maximum to the number of funds that can be held. 6 Delta and Premiere Discounted Trust Accounts Adviser Guide

7 Fund switching The trustees can control fund switching or they can appoint a nominated fund adviser. Instructions can be sent by fax but we cannot accept them by . Instructions for Premiere Discounted Trust Accounts can also be given by phone. The Delta Discounted Trust Account offers unlimited free fund switching but the nature of the investments held within the Premiere Discounted Trust Accounts are such that a fee will apply for each buy or sell transaction. More detailed information on costs can be found in the Key Information Document and Charges & Fees document for each Account. Fund advisers A fund adviser can be appointed to any of the accounts, subject to holding the appropriate authorisation. The client and fund adviser agree the level of fund adviser fee and this can be paid from the Account. Please note that past performance is not a guide to the future. The value of units can fall as well as rise and currency fluctuations can also affect performance. Delta and Premiere Discounted Trust Accounts Adviser Guide 7

8 Transferring existing assets Investment into the Premiere Discounted Trust Accounts is not just restricted to a cash investment as we can also accept existing funds (this option is not available on the Delta Discounted Trust Account). If acceptable, these will be transferred into the name of CLI to constitute the premium into the Account and any dealing expenses will be deducted. The process for transferring existing assets is straightforward, but you should take note of the following points: Investments transferred in must be on our fund list (available on our website). All investments transferred are valued once they have been registered in the name of CLI. This value is added to any cash transferred. This total amount becomes the premium. A transfer of assets constitutes a change of ownership and thus a realisation of that asset. It is possible that a gains tax, or equivalent profits tax liability will arise. It is also possible to generate a liability to stamp duty, or other similar taxes. Withdrawals and surrenders Taking money from a Discounted Trust Account The only money that your client can receive is the regular withdrawal that they select at outset. The amount and frequency of the regular withdrawal cannot be changed or stopped during their lifetime. The trustees cannot surrender the Account or sub-policies during your client s lifetime. Following the death of your client (or both clients if joint settlors), there are four approaches that the trustees can take. There is no charge for withdrawing money unless a sale of investments is required (which may incur a transaction fee). In all cases the value remaining in the Account after the withdrawal/surrender must be greater than the minimum permissible Account value (see Minimum Account value on page 9). Dealing charges may apply (please refer to the appropriate Charges & Fees document for details). 1. Regular withdrawals Regular withdrawals may be set-up. They can be made by cancelling units across all funds, in proportion to the fund values (Delta Discounted Trust Account) or from a specific fund or group of funds (Premiere Discounted Trust Account). The withdrawals can be taken monthly, quarterly, half-yearly or yearly and the minimum withdrawal is 50 (or currency equivalent) for any frequency. Regular withdrawals are for a specified monetary amount and are made in the currency that the Account was set-up in. 2. One-off withdrawals One-off withdrawals can be taken from the Account. Withdrawals are for a specified monetary amount and are made in the currency that the Account was set-up in. The minimum one-off withdrawal is 200 (or currency equivalent). 8 Delta and Premiere Discounted Trust Accounts Adviser Guide

9 3. Sub-policy surrender (by trustees after settlor s death) A sub-policy surrender involves the encashment of one or more sub-policies from an Account. See Account structure (on page 12) for further details about the options for sub-policies. 4. Full surrender (by trustees after settlor s death) Your client can surrender the whole Account. Full surrender involves the encashment of all sub-policies in the Account. Any outstanding charges will be deducted from the proceeds payable. Payment Proceeds from withdrawals and surrenders can be made by BACS or CHAPS (there will be a charge for payments made using CHAPS). Minimum Account value The Accounts all require a minimum value to allow them to continue: The Delta Discounted Trust Account must maintain a value greater than 2,000 (plus any outstanding charges). The Premiere Discounted Trust Account must maintain a value greater than 5,000 (plus any outstanding charges). Any Account which does not meet the minimum value requirement will be reviewed by CLI which reserves the right to surrender any Account which falls below the minimum account value. Adviser charge deductions The client can ask us to deduct an amount to help meet the fees they incur. Initial adviser charges We can deduct either a percentage of the investment or a monetary amount before any investment into a Discounted Trust Account is made. Any amount deducted and paid will not be classed as a gift by the client and will not count towards the 5% tax deferred allowance (please see the section on Tax). Ongoing adviser charges Ongoing adviser charge payments are available under the range of Discounted Trust Accounts. For further details please refer to our Adviser remuneration options Estate planning (reference MKT651). Single/ad hoc adviser charges These are not available under the range of Discounted Trust Accounts but can be added by the trustees after the death of the settlor(s). Delta and Premiere Discounted Trust Accounts Adviser Guide 9

10 Death benefit The death benefit on the Account is the value of units calculated at the next valuation date following receipt of written notification of death plus 100 (or currency equivalent), less any outstanding charges. The death benefit will be paid out when all the investments have been settled and we have received all of the required documentation. If there is more than one life assured, the Account can continue until the death of the last life assured when the death benefit is payable. The trustees will inform us of the death of the client or both clients if joint settlors. The trustees will then decide whether to cash in all or part of the Account by way of a one-off withdrawal, regular withdrawals, sub-policy surrender or full surrender, and pay the money to the beneficiaries. Alternatively the trustees can choose to leave the Account invested until such time as they want the funds distributed to the beneficiaries. Tax The following notes assume that the policyholders referred to are UK resident for tax purposes. Taxation of Canada Life International Limited Because we are resident in the Isle of Man, there are no local taxes on the capital growth or income which accrue to our funds. However, withholding tax may be charged on certain investments and this is not reclaimable. Taxation of funds Funds can be switched freely without any capital gains tax arising on the policyholder. Similarly, (with the exception of the aforementioned withholding taxes) income arising on those funds is free of tax. This means that profits from the Account are not taxed until taken from the Account itself. Income tax When profit is taken from the Account, this is referred to as a chargeable gain and is taxed on a UK resident policyholder as the chargeable gain arises. Chargeable gains are taxed to income tax. The premium paid into an Account gives the Account a withdrawal allowance equal to 5% of the payment in the year in which it is paid and the next nineteen Account years. This allowance is cumulative and any unused allowance can be carried forward for use in later years. Effectively, the legislation allows for the return of the original premium tax-deferred but no faster than one twentieth of the premium each year. If a client or the trustees withdraw more than a total of 5% each year, then the excess will give rise to an income tax charge at their highest marginal rate. This liability may be reduced as a result of top-slicing relief. The income payable to the client will count against this 5% allowance. 10 Delta and Premiere Discounted Trust Accounts Adviser Guide

11 Inheritance tax Using the discretionary trust arrangement Under the discretionary trust arrangement, the client(s) will take out a specially designed life insurance policy (the Account), which will confer various rights on its policyholder. The client(s) will immediately exercise the right to take regular withdrawals from the Account. The right to regular withdrawals (the retained right) rests with the client(s) for life or until the Account is worthless, and cannot be defeated. The client(s) will then settle the remaining rights conferred by the Account (the gifted rights) into a specially designed trust (the trust). The trust is a discretionary trust, in favour of beneficiaries chosen by the client. The client(s) cannot be a beneficiary of the trust. Initial gift under the discretionary trust arrangement The assignment of the gifted rights into the trust will be a chargeable transfer of value, as the trust will be a discretionary trust. Because the retained right cannot be defeated by the trustees of the trust, there will be a discount on the value of the chargeable transfer. CLI will underwrite each client(s) to provide an indication of the discount available. Further details are provided in the Discounted Trust Account Discretionary Tax Notes (reference 6570). Using the bare trust arrangement The bare trust of the gifted rights is for the benefit of named individuals and there is no flexibility in this. Once the bare trust of the gifted rights has been established, the trustees cannot change the proportion of the gifted rights that a named beneficiary will receive. Furthermore, the trustees have no power to change the actual beneficiaries of the bare trust of the gifted rights. Initial gift under the bare trust arrangement The assignment of the gifted rights to the beneficiaries of the bare trust will be an absolute gift as a single bare trust is not a settlement for IHT purposes. As such, the gift should be a potentially exempt transfer (PET). Because the retained right cannot be defeated by the trustees of the trust, there will be a discount on the value of the PET. CLI will underwrite each client to provide an indication of the discount available. The value of the PET will be the market value, for IHT purposes, of the policy on the date of the assignment of the gifted rights to the beneficiaries of the bare trust less the actuarial value of the retained right on that date. The result will represent the reduction in the client s estate at the date of the gift. On the client surviving seven years from the making of the PET, the PET should become fully exempt from IHT. Further details are provided in the Discounted Trust Bare Trust Tax Notes (reference 6619). This is based on our understanding of relevant UK legislation as at January 2018 which may be altered and depends on the individual financial circumstances of the investor. We recommend that your client(s) seek their own independent tax advice. Delta and Premiere Discounted Trust Accounts Adviser Guide 11

12 Service charter When you recommend an investment solution to a client you are not only recommending the product and the fund performance, but also the provider s current and future service standards. We are confident of our superior levels of service and to show our commitment to this, we have published service standards and non performance penalties as part of our Investment and estate planning service charter (reference 7280). If we don t keep our promises, we will pay you or your client. You will find the Investment and estate planning service charter on our website or you can ask us for more details. Account structure Type of policy The Accounts are all established as a single premium offshore life assurance policy issued by CLI. Basis of the Accounts The Accounts are life assurance policies and can be issued on the following basis: Single life Joint life last survivor Multiple lives The Accounts can be issued with up to six lives assured if the multiple lives basis is chosen. Please note that an applicant, settlor, spouse or civil partner cannot be a life assured. Eligibility The Account is ordinarily only available to residents of the United Kingdom, Channel Islands and the Isle of Man. US residents and citizens will not be accepted in any circumstances. Policyholder age Life/lives assured age Delta Discounted Trust Account Minimum age 18 None Maximum age for youngest Premiere Discounted Trust Account Minimum age 18 None Maximum age for youngest 12 Delta and Premiere Discounted Trust Accounts Adviser Guide

13 Account currency The Delta and Premiere Discounted Trust Accounts can be denominated in sterling, US dollar or euro. Once the Account has been issued, the Account currency cannot be changed. In addition the Premiere Discounted Trust Account is able to deal in any freely negotiable currency and hold assets in currencies different to the Account denomination. Minimum investment The minimum initial investment amounts (or currency equivalents) are: Delta Discounted Trust Account 25,000 Premiere Discounted Trust Account 50,000 Premium payment Premiums may be paid by any of the following methods: CHAPS BACS Cheque Share Transfer (Premiere Discounted Trust Accounts only) Segmentation (sub-policies) The ability to split the Account into sub-policies can provide valuable tax planning opportunities and a range of options is available across the different Accounts: The Delta Discounted Trust Account is issued as 10 separate, but identical, sub-policies. The Premiere Discounted Trust Account can be issued as a cluster of up to 998 separate, but identical sub-policies. Valuations We produce regular Account valuations, the frequency of which will depend on the Account chosen: Delta Discounted Trust Account yearly valuation. Premiere Discounted Trust Account quarterly valuation plus a statement of all transactions on the last business day of every calendar quarter. This will be sent to you or your client (depending on the instruction given on the application form) within 10 working days of the date produced. Additional valuations may be requested at other times and are subject to an additional charge (please refer to the appropriate Charges & Fees document for further details). Delta and Premiere Discounted Trust Accounts Adviser Guide 13

14 Charges Different clients will have different circumstances so we offer a range of charging options across the Accounts. Please refer to the appropriate Key Information Document and Charges & Fees document for further details. Delta Discounted Trust Account The establishment charge is based on the original premium value and there are two options available: Option 1 the establishment charge is taken as a one-off charge reducing the allocation rate. Option 2 the establishment charge is deducted monthly from the policy over five years. Further details can be found in the Delta Account Key Information Document (reference IOM01004) and Delta Discounted Trust Account Charges and Fees (reference 6494). Premiere Discounted Trust Account There are three options available: Option 1 the establishment charge is taken as a one-off charge reducing the allocation rate. Option 2 the establishment charge is deducted quarterly from the policy over five years. Option 3 a management fee is taken quarterly in arrears based on the greater of the value of the policy or the cumulative premium(s). Further details can be found in the Premiere Account Key Information Document (reference IOM00996) and Premiere Discounted Trust Account Charges and Fees (reference 6495). Personal illustrations Your client will be provided with a product-specific personal illustration to show the costs and benefits of running their Account with the portfolio of funds selected. The illustration includes all product charges, investment charges and discounts to give your client/you an all-inclusive cost of the Account. In addition to this illustration the client must be provided with the product Key Information Document before making a decision on a application. 14 Delta and Premiere Discounted Trust Accounts Adviser Guide

15 Forms Forms for Delta and Premiere Discounted Trust Accounts can be downloaded from our dedicated professional adviser website New business requirements Please make sure that the following items are completed and enclosed with each submission: Application form Discretionary or Bare Trust Deed (reference 6509 and 6612 respectively) Copy of the pre-sale personal illustration Certified copy of the applicants and trustees passport or photographic identification Certified copy of a utility bill/or equivalent document (must be the latest available copy) reflecting the applicants and trustees residential address Our Guide to Anti-Money Laundering contains more information on anti-money laundering, and types of acceptable documentary evidence for client identification, address and source of wealth. The guide can be found on our website: Please note that if parts of the application are missed or documentation is not enclosed, then this will result in a delay in policy commencement and issue. Delta and Premiere Discounted Trust Accounts Adviser Guide 15

16 Contact information Our Adviser Support Team is there to provide you with dedicated sales support. They are on hand to assist you with all pre-sale, new business and ongoing servicing queries on all products. Telephone: +44 (0) Fax: +44 (0) By post: Website: Adviser Support Team Canada Life International Limited Canada Life House Isle of Man Business Park Douglas Isle of Man IM2 2QJ Alternatively you can contact your account manager in the usual way. Canada Life International Limited, registered in the Isle of Man no Registered office: Canada Life House, Isle of Man Business Park, Douglas, Isle of Man IM2 2QJ. Telephone: +44 (0) Fax: +44 (0) Member of the Association of International Life Offices. Canada Life International Limited is an Isle of Man registered company authorised and regulated by the Isle of Man Financial Services Authority. This paper is made from recycled materials R