Given the importance of pension savings to the longer-term financial wellbeing of most clients, writing SIPP business on an ‘insured’ basis rather than a ‘trust’ basis can prove to be a prudent decision, and one that gives clients more protection and peace of mind over the longer-term.
There are several reasons for this:
- As an insurance company, Sanlam Life & Pensions UK Limited (SLP) meets the stringent capital adequacy requirements of Solvency II. Our systems, controls and financial reporting are all designed to meet these obligations. As a result, our solvency levels are stronger and more stringent than the capital adequacy requirements for a trust-based SIPP.
In the unlikely event that we are unable to meet our liabilities, investor protection comes in to play. For certain long-term insurance contracts, the Financial Services Compensation Scheme (FSCS) provides 100% cover with no upper limit.
All assets held within The Sanlam OneSIPP are owned by SLP, and we set up a mirror fund that invests directly in the underlying funds of the external fund manager. Monies invested in external funds (including mirror funds) are kept separate from the company that manages the fund, and a depositary or custodian may be appointed to ring-fence that money from that of the fund manager. Should the external fund manager or company default, the custodian would return any monies, giving your client protection from defaults because of things like fraud or mismanagement. If, on the other hand SLP is in default, the value of any investment held in external funds would still form part of a claim under FSCS, as outlined above.
In comparison, SIPP providers who are not insurance companies have trust-based SIPPs, and they themselves fall into the investment section of the FSCS. This currently provides cover up to £85,000 per person per firm. Each investment held within a trust-based SIPP will be subject to its own FSCS protection up to the relevant limits. For example, the £85,000 limit applies to both deposit accounts and investment business, so it’s important to consider where funds are invested.
There are no VAT charges applicable to an insured pension contract meaning this gives your client a potential 20% cost saving when compared to a trust-based SIPP.
The Sanlam OneSIPP – a new generation of insured SIPPs
Traditionally, SIPPs written on an insured basis gave clients a narrower investment choice than trust-based SIPPs and often came with higher management costs due to the capital adequacy requirements. But we think the Sanlam OneSIPP overcomes these issues, while still offering full SIPP functionality, such as access to Discretionary Fund Management, commercial property, and other permitted assets.
Through the OneSIPP, clients can invest in the Sanlam multi-asset range via a mirror fund that invests directly in the underlying funds. The funds use the same investment philosophy and process that lies behind our discretionary portfolios, but with lower management fees. And for clients investing £100,000 and above, we are currently running a special offer where they will also benefit from having the initial and annual charges waived.
Our award-winning multi-asset range consists of four directly invested funds with different long-term return and risk objectives. Clients therefore have access to a range of investments that can be used to meet their own changing objectives and risk appetite, while remaining fully diversified. They also have access to flexi-access drawdown when they decide they want to start taking an income, while remaining invested.
Peace of mind
As part of a global financial services group, renowned for its good fiduciary practice and corporate governance, we have considerable experience ensuring customers’ investment interests are not compromised. That’s why we’ve decided that we will only accept new SIPP business on an insured basis going forward, and we look forward to discussing this opportunity with you in more detail.
Read the AKG report for more information on our financial strength.