What impact are the planned pension reforms in the UK having on the outlook for sales?
With pension freedom recently introduced, there are still many unknowns.
One thing that is evident is that clients will face more choices at retirement, meaning the demand for professional advice will be greater than ever before.
Different solutions will work for different clients, and offshore bonds will have a role to play.
Both income and gains are rolled up gross in an offshore bond, and withdrawals of up to five per cent of the original capital can be taken without an immediate tax charge.
This ability to defer and control when income becomes taxable is a valuable tool for tax planning.
Timing withdrawals to coincide with tax years when there is little or no other income can result in gains falling within the personal allowance and savings rate band.
Another useful planning feature for offshore bonds is the ability to assign the bond or segments without triggering a tax charge.
The new owner, if a non-taxpayer, then becomes assessable to future tax.
There are a number of reasons to believe we will see growth in the offshore space following the introduction of pension freedoms – but how big or small this growth will be remains to be seen.
What are your plans for onshore bonds? How big do you see that opportunity developing and how will you distribute this product?
In October 2014, we launched the Prudential Onshore Portfolio, a platform-enabled bond.
We saw an opening in the market where it was hard for advisers and clients to access an open architecture platform enabled onshore bond.
It is early days but we feel an open architecture onshore bond has a pivotal role to play in the advice process.
The product is currently available through a small number of platforms but we have plans to make this product available via 10 platforms before the end of 2015, with further expansion in subsequent years.
The product has a minimum premium of £15,000, access to a large number of collectives, other investment options and comes with a full trust proposition.
What impact has the recent announcements from HM Revenue & Customs regarding QROPS flexibility having on the market?
HMRC recently announced the ‘70% rule’ on QROPS will remain ‘temporarily’ following the pension reforms on 6 April. At Prudential International we have seen reasonably strong demand for pension transfers to SIPPS.
All of the SIPP providers Prudential International deals with have made the necessary changes to cope with pension freedom, which includes clients being able to access their entire SIPP and choosing how to take their income during their retirement.
In essence, by using a SIPP, clients have the certainty that they can take full advantage of these freedoms and take their tax-free lump sum, set up income drawdown to receive regular income and/or take their pension as a series of lump sums.
