12
Therefore, making an irreversible
decision such as gifting money
becomes fraught with difficulty,
because the future is so uncertain.
The desire to protect an estate
from IHT has to be balanced
against possible, but unknowable,
future spending commitments.
BPR products do not require investors
to make irreversible decisions.
Subject to the usual warnings around
liquidity and fluctuating valuations,
money can be withdrawn at any time
for any purpose. There is no need
to sacrifice access and control.
NEW FREEDOMS, GROWTH
AND INFLATION
In addition, from April 2015 many people
will no longer be obliged to purchase an
annuity with their pension pot. It is likely
that we will see more people choosing to
stay invested for longer, use drawdown
solutions and defer purchasing an
annuity.
WHAT ARE YOUR PLANS FOR
YOUR PENSION?
The impacts of these changes will have
to be assessed, but one thing that is
clear is that clients will be looking for
innovative at-retirement solutions
that provide some of the certainties
they require in later life and the
opportunity for growth - perhaps not
growth at the same level as required
in the accumulation phase, but at least
inflation beating growth to preserve the
value of their assets.
BPR products are invested - so there
is risk involved - but they are usually
invested cautiously with targeted returns
ranging from 3-7% a year. So there is
an investment case for these products
that goes beyond solely looking at IHT
mitigation.
On the other hand, the new legislation
that will abolish the 55% “death tax”
on pensions from April 2015 may well
make pensions a more attractive estate
planning option – at least up to the age of
75 – and this may impact the BPR market.
As we age, our life expectancy increases
– so people who live beyond 65 need to
plan for a longer than average life.
TOUGH DECISIONS
Perhaps when IHT only affected very
wealthy people, at a time when life
expectancies were lower, it was less of
an issue - they knew they could gift or
place significant amounts of money in
a trust and still afford their retirement.
But many of the generation who are
contemplating IHT for the first time
today are in a very different situation:
As mass-affluent rather than seriously
high-net-worth, they feel strongly that
they want to pass as much of their wealth
onto the next generation as possible
They cannot afford to lose control of
it as they have no way of knowing how
much they will need for themselves
They know an annuity could turn out
to be very poor value
They know that keeping their wealth
invested can be risky
They know that reducing risk can
limit growth
They have more wealth and freedom
to invest than ever before, but are faced
with a very tough set of decisions. The
flexibility and simplicity of BPR products
can provide solutions, and advisers
need to be aware of these options so
that they can offer their clients the most
comprehensive advice possible.
“Business Property Relief
helps address some of the more
complex issues associated
with estate planning, where
conventional IHT strategies
come up short for today’s
investors”
Sam Barton,
Close Brothers Asset Management
Source: OCED
Take my whole pension as
cash in one go (25% tax free
and the rest taxed)
41
%
Take 25% tax-free as cash
inmediately and take the
rest of the pot as cash when
I want
21
%
Take 25% tax-free as cash and
take a taxable regular income
but not cash from the rest
19
%
Take 25% tax-free as cash
and leave the rest invested
9
%
I don’t have a plan at the moment
8
%
Source: Hargreaves Lansdown. October 2014,
based on 213 respondents. New pension
freedoms will require advisers to offer more
at-retirement options
“BPR products do not require investors to make irreversible decisions”
Females
Males
0
50
50
100
100
10
20
30
40
50
60
70
80
90
LIFE EXPENTANCY
(2011-2013)
Life expectancy
Age
