Tax Planning Utilising Multiple Wrappers Nick Minto – Intermediary Sales Manager SimplyBiz Non-Mainstream Events

Learning Outcomes By the end of this session, delegates will: understand how to maximise the benefit of annual tax allowances, have the knowledge to utilise and blend different tax wrappers, have learned how providers are supporting the client life cycle. SimplyBiz

The Charles Stanley Group About Charles Stanley SimplyBiz Unless otherwise indicated, the information in this presentation relates to the company. *as at 31st March 2017

Tom could be the perfect client Tom (58) has just sold his own business and wishes to retire Previously he was a member of a final salary scheme, leaving service in March 2006 and applying for enhanced protection in April 2006 He hasn’t paid into a pension since he left his previous employer in March 2006 He has recently transferred his final salary benefits into a SIPP His wife Mary (53) also has a SIPP valued at £300,000 and ISAs worth £100,000 They have two children both working – Jack (22) earns £20,000 and hasn’t joined his company scheme, Jill (23) earns £20,000 with a 5% contribution going into an employer- sponsored arrangement. SimplyBiz

A £36,000 tax-efficient income Tom would like A £36,000 tax-efficient income Use allowances Use all his investments Provide for his family when he’s gone Different methods of IHT planning Consider the ‘what if’ scenarios SimplyBiz

What are Tom’s investments SIPP £1.5M Inheritance £200k *Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k SimplyBiz *£100,000 invested into offshore bond, 100 segments

UK Tax rates and allowances – Use it or lose it Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k Allowance/Tax 2017/2018 Personal allowance £11,500 Starting rate on savings income £5,000 Savings allowance £1,000, £500 or £0 Annual dividend allowance CGT allowance £11,300 IHT nil rate band £325,000 Main residence nil rate band £100,000 SimplyBiz Tax Planning Utilising Multiple Wrappers

UK Tax rates and allowances – Use it or lose it Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k Allowance/Tax 2017/2018 Personal allowance £11,500 Starting rate on savings income £5,000 Savings allowance £1,000, £500 or £0 Annual dividend allowance CGT allowance £11,300 IHT nil rate band £325,000 Main residence nil rate band £100,000 SimplyBiz Tax Planning Utilising Multiple Wrappers

UK Tax rates and allowances – Use it or lose it Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k Allowance/Tax 2017/2018 Personal allowance £11,500 Starting rate on savings income £5,000 Savings allowance £1,000, £500 or £0 Annual dividend allowance CGT allowance £11,300 IHT nil rate band £325,000 Main residence nil rate band £100,000 SimplyBiz Tax Planning Utilising Multiple Wrappers

UK Tax rates and allowances – Use it or lose it Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k Allowance/Tax 2017/2018 Personal allowance £11,500 Starting rate on savings income £5,000 Savings allowance £1,000, £500 or £0 Annual dividend allowance CGT allowance £11,300 IHT nil rate band £325,000 Main residence nil rate band £100,000 SimplyBiz Tax Planning Utilising Multiple Wrappers

Tax Bands and Allowances Income Tax Order of Taxation Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k 45% Additional rate tax band 40% Higher rate tax band 20% Basic rate tax band Savings income band Personal allowance Earned income Interest/Savings Dividends Life policy gains Capital gains SimplyBiz This table is for information purposes only. The order may vary based on an individual’s personal circumstances.

Tax Bands and Allowances Income Tax Order of Taxation Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k 45% Additional rate tax band 40% Higher rate tax band 20% Basic rate tax band Savings income band Personal allowance Pension income Interest/Savings Dividends Life policy gains Capital gains SimplyBiz This table is for information purposes only. The order may vary based on an individual’s personal circumstances.

Tax Bands and Allowances Income Tax Order of Taxation Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k 45% Additional rate tax band 40% Higher rate tax band 20% Basic rate tax band Savings income band Personal allowance Pension income Interest/Savings Dividends Life policy gains Capital gains SimplyBiz This table is for information purposes only. The order may vary based on an individual’s personal circumstances.

Tax Bands and Allowances Income Tax Order of Taxation Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £500k Business sale proceeds £300k 45% Additional rate tax band 40% Higher rate tax band 20% Basic rate tax band Savings income band Personal allowance Pension income Interest/Savings Dividends Life policy gains Capital gains SimplyBiz This table is for information purposes only. The order may vary based on an individual’s personal circumstances.

Maximise income allowances Order Tax allowance Wrapper Income Capital Pension Income Personal SIPP £1.5m £11,500 £3,833 (pcls) Interest/Savings Savings & interest allowance Offshore Bond* £200,000 £6,000 Dividends Dividend Share Portfolio £150,000 £4,500 Life Policy Gains Basic rate Nil Capital Gains £11,300 Total £22,000 £9,833 Total Income = £31,833 Tom could make up any shortfall from capital, ISA and/or utilising his capital gains tax allowance SimplyBiz * £100,000 invested into offshore bond, 100 segments – value £200,000 – 6 segments encashed

A £36,000 tax-efficient income Tom would like A £36,000 tax-efficient income Use allowances Use all his investments Provide for his family when he’s gone Different methods of IHT planning Consider the ‘what if’ scenarios SimplyBiz Tax Planning Utilising Multi Wrappers

Share portfolio £150k yield 3% Business sale proceeds £300k Inheritance Tax Tom SIPP £1.5M Inheritance £200k Offshore bond £200k Share portfolio £150k yield 3% ISA £200K House £250k Business sale proceeds £300k Asset Tom Mary Business Sale £300,000 Inheritance £200,000 House (£500,000/2) £250,000 ISA £100,000 Shares £150,000 Offshore Bond Total £1,300,000 £350,000 Mary SIPP £300k ISA £100k House £250k SimplyBiz Tax Planning Utilising Multiple Wrappers

Inheritance tax payable by surviving spouse’s estate - £320,000 Nil rate band £325,000 On first death transfer assets and nil rate band to surviving spouse Residential nil rate band 17/18 - £100,000 (each) Estate under £2m Property left to direct descendants They own their home Joint Estate - £1.65m Minus nil rate bands - £850,000 Estate liable to IHT - £800,000 Tax rate 40% Inheritance tax payable by surviving spouse’s estate - £320,000 SimplyBiz Tax Planning Utilising Multiple Wrappers

What type of solution could they consider? Last survivor protection policy – written in trust Gift outright – 3rd party pension contribution, LISAs Stop drawing pension benefits Spend Investment in IHT services AIM portfolios OR Also make sure they have up to date wills Packaged trusts absolute or discretionary Loan Trust Discounted Gift Trust Gift Trust SimplyBiz Tax Planning Utilising Multiple Wrappers

Chargeable Lifetime Transfer (CLT) Best Fit or Blend? Solution Access IHT Position Underwriting Chargeable Lifetime Transfer (CLT) Trust Loan Trust Loan only All growth outside the estate No Yes Discounted Gift Trust Right to income Initial discount residual falls out after 7 years. All growth outside estate Potentially Gift Trust Nil Falls outside estate after 7 years. All growth outside estate from day 1 AIM Portfolio Asset value 100% relief for IHT after 2 years through business property relief SimplyBiz Tax Planning Utilising Multiple Wrappers

Chargeable Lifetime Transfer (CLT) Best Fit or Blend? What if Tom wants to gift £425,000 into a discretionary trust? Solution Access IHT Position Underwriting Chargeable Lifetime Transfer (CLT) Trust Loan Trust Loan only All growth outside the estate No Yes Discounted Gift Trust Right to income Initial discount residual falls out after 7 years. All growth outside estate Potentially Gift Trust Nil Falls outside estate after 7 years. All growth outside estate from day 1 AIM Portfolio Asset value 100% relief for IHT after 2 years through business property relief SimplyBiz Tax Planning Utilising Multiple Wrappers

Best Fit or Blend? Using his nil rate and residential nil rate bands? What if Tom wants to gift £425,000 into a discretionary trust? Solution Access IHT Position Underwriting Chargeable Lifetime Transfer (CLT) Trust Loan Trust Discounted Gift Trust Gift Trust £425,000 Nil Falls outside estate after 7 years. All growth outside estate from day 1 No Potentially Yes AIM Portfolio Using his nil rate and residential nil rate bands? SimplyBiz Tax Planning Utilising Multiple Wrappers

Best Fit or Blend? Using his nil rate and residential nil rate bands? What if Tom wants to gift £425,000 into a discretionary trust? Solution Access IHT Position Underwriting Chargeable Lifetime Transfer (CLT) Trust Loan Trust Discounted Gift Trust Gift Trust £425,000 Nil Falls outside estate after 7 years. All growth outside estate from day 1 No Potentially Yes AIM Portfolio Using his nil rate and residential nil rate bands? 20% CLT on £100k SimplyBiz Tax Planning Utilising Multiple Wrappers

Chargeable Lifetime Transfer (CLT) Best Fit or Blend? What if Tom wants to gift £425,000 into a discretionary trust? Solution Access IHT Position Underwriting Chargeable Lifetime Transfer (CLT) Trust Loan Trust Discounted Gift Trust Gift Trust £425,000 Nil Falls outside estate after 7 years. All growth outside estate from day 1 No Potentially Yes AIM Portfolio £100,000 Asset value 100% relief for IHT after 2 years through business property relief SimplyBiz Tax Planning Utilising Multiple Wrappers

Performance Sources: Charles Stanley and Bloomberg. In order to demonstrate performance Charles Stanley established a portfolio of AIM shares on 12 July 2012 and returns are measured on a quarterly basis. Capital only. Returns calculated at mid-prices. Charles Stanley IHT Service gross of 1.25% + VAT annual management fee and 1% dealing charge. Past performance is not a guide to the future and the price of shares, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested. SimplyBiz

So what about the pensions Not subject to IHT Options on death Annuity purchased for the survivor Paid out as a lump sum Allocate to survivor or nominee(s) – Beneficiaries drawdown Spousal bypass trust SimplyBiz Tax Planning Utilising Multi Wrappers

Beneficiaries Drawdown and Spousal Bypass Trust Beneficiaries Drawdown Nominations Spousal Bypass Irrevocable discretionary family trust Control via trustees No Chargeable Lifetime Transfer – Periodic and Exit charge? Spouse can still benefit from income Doesn’t form part of spouse estate Capital and loans at the trustee discretion Income tax charge at trust rate if Tom’s death occurs after age 75 Tom’s SIPP Mary 50% Jack 25% Jill 25% SimplyBiz Tax Planning Utilising Multi Wrappers

Beneficiaries Drawdown and Spousal Bypass Trust Beneficiaries Drawdown Nominations Spousal Bypass Irrevocable discretionary family trust Control via trustees No Chargeable Lifetime Transfer – Periodic and Exit charge? Spouse can still benefit from income Doesn’t form part of spouse estate Capital and loans at the trustee discretion Income tax charge at trust rate if Tom’s death occurs after age 75 Tom’s SIPP Mary 50% Tim new husband John – Tim’s son Julie – Tim’s daughter Jack 25% Jill 25% SimplyBiz Tax Planning Utilising Multi Wrappers

A £36,000 tax-efficient income Tom would like A £36,000 tax-efficient income Use allowances Use all his investments Provide for his family when he’s gone Different methods of IHT planning Consider the ‘what if’ scenarios SimplyBiz Tax Planning Utilising Multi Wrappers

How can Charles Stanley help Tom? Investment Platform – Model portfolios Discretionary Service SIPP General Investment Account Offshore Bond Packaged Trusts AIM Portfolios SimplyBiz Tax Planning Utilising Multi Wrappers

How can Charles Stanley help Tom? Investment Platform – Model portfolios Discretionary Service SIPP General Investment Account Offshore Bond Packaged Trusts AIM Portfolios SimplyBiz Tax Planning Utilising Multi Wrappers

How can Charles Stanley help Tom? Investment Platform – Model portfolios Discretionary Service SIPP General Investment Account Offshore Bond Packaged Trusts AIM Portfolios SimplyBiz Tax Planning Utilising Multi Wrappers

How can Charles Stanley help Tom? Investment Platform – Model portfolios Discretionary Service SIPP General Investment Account Offshore Bond Packaged Trusts AIM Portfolios SimplyBiz Tax Planning Utilising Multi Wrappers

How can Charles Stanley help Tom? Investment Platform – Model portfolios Discretionary Service SIPP General Investment Account Offshore Bond Packaged Trusts AIM Portfolios SimplyBiz Tax Planning Utilising Multi Wrappers

How can Charles Stanley help Tom? Investment Platform – Model portfolios Discretionary Service SIPP General Investment Account Offshore Bond Packaged Trusts AIM Portfolios SimplyBiz Tax Planning Utilising Multi Wrappers

Learning Outcomes By the end of this session, delegates will: understand how to maximise the benefit of annual tax allowances, have the knowledge to utilise and blend different tax wrappers, have learned how providers are supporting the client life cycle. SimplyBiz Tax Planning Utilising Multi Wrappers

Important information The information given in this presentation is based upon sources we believe to be reliable, but its accuracy cannot be guaranteed. The information does not constitute advice or a personal recommendation and you are recommended to seek advice concerning suitability from your investment adviser. Tax reliefs are those currently applying and the levels and bases of taxation can change. Investors should be aware that past performance is not a guide to the future and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than their original sum. Charles Stanley & Co. Limited is authorised and regulated by the Financial Conduct Authority and is a wholly owned subsidiary of Charles Stanley Group PLC. A member of the London Stock Exchange. © Charles Stanley & Co. Limited 2017. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England number 1903304. Details of Charles Stanley group companies and their regulators (where applicable) can be found at this URL: http://www.charles-stanley.co.uk/contact-us/disclosure SimplyBiz