There seems to be mixed understanding on Flexible drawdown at the moment given that a number of SIPP providers are reluctant to offer this until later in 2011. An example is the question that I am asked on a regular basis: "when are you launching your Flexible Drawdown SIPP?"
There is a slight "Emperor's New Clothes" feel about simply rebranding and presenting a Flexible Drawdown product so that is not the direction we are going in. The reality is that Flexible Drawdown is an option currently available under the Curtis Banks SIPP, Group SIPP and SSAS.
While on the subject a few procedural points on Flexible Drawdown may be helpful:
- On the basis that the SIPP is not being wound-up there are no additional fees for flexible drawdown.
- This means that the charges your clients may incur are the standard vesting charge (£120) and pension payroll charge (£125 p.a.) as they did with USP.
- Obviously we will need adequate evidence that the client is in receipt of the MIR and as a reminder this must be paid in the current financial year - particularly relevant if the income is a pension annuity.
- If the SIPP funds are being significantly exhausted we will work with the client's adviser to understand the overall position in terms of suitability.
- In practice this means initially understanding whether formal advice has been provided to the client. If not we have a due diligence process to carry out to satisfy ourselves in terms of our own TCF requirements.
Going forward we view Flexible Drawdown as a positive move and in the right hands a valuable financial planning tool providing clients much more flexibility on tax planning, use of personal taxation allowances, lifestyle planning and long term care issues.
As always clients receiving advice will benefit the most from this legislative change and we have the products and systems in place today to support you in this process.