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QUESTION: Can you briefly explain the genesis of the Family Suntrust proposition? What prompted its development?

TONY MOORE: Following the Pension Simplification changes in 2006 a new opportunity arose to create a truly personalised self invested pension scheme for families and groups of connected people such as business partners.

Family Suntrust was therefore created to meet a customer need by filling a gap in the range of options available to family groups in the pensions market. Prior to the change in legislation people could only participate in either their own individual self invested plan (traditional provider sponsored Master Trust SIPPs) or an employer sponsored self invested scheme provided through their company (a SSAS).

It blends together the key features of both. It fits a new high value niche market opportunity between our existing individual SIPP proposition (for people who want exclusive control of their own investments in their own arrangement); and our SSAS proposition (for people who are happy to invest through a scheme linked to their employment).

This gives us a complete range of self invested pension options, so whatever an individual customer’s needs are we have a solution which fits. No other major insurance company provider has such coverage in terms of customer solutions. We have responded to a customer need that has been created by a change in legislation.

Q: The initial idea was conceived in a brighter financial landscape. Has the product’s development been affected by events of the last 9-12 months; is it ‘credit crunch proof’?

TM: With very few exceptions, investment returns are not guaranteed. Of course, you all have now experienced that the value of any investment may fall as well as rise and a customer may get back less that they have invested; but I’m sure we all know this. However, if I didn’t think we had a robust product I wouldn’t be speaking with you now.

So nothing is guaranteed. Having said that, the potential economies of scale of a family arrangement, such as Family Suntrust, puts our customers in a potentially stronger position. You can then start to look at AXA Sun Life Plc’s strong brand and heritage in the self-invested market to realise that you and your clients can feel confident in choosing AXA and Family Suntrust..

With this in mind, throughout the development of the proposition we have talked to our customers. We have taken into account both their own, and their advisers’ aspirations and concerns. And we have sought to meet the needs of individuals and their families (or business partners), both now and in the future – whatever that may bring.

As such, the investment strategy of the scheme is flexible and can be as cautious or adventurous as customers wish. Decisions for the longer term can still be made based on the prevailing financial wind at any given time. It’s their pension scheme so they call the shots.

Indeed, during testing someone commented: “The world has turned upside down and you are thinking about your future and your children’s future; this product has come out just in time*.” So who am I to argue?

Q: So what distinguishes Family Suntrust from products offered by the rest of the market?

TM: I’ve touched on a couple of points previously; the pooled investment fund increases purchasing power, borrowing capability (for property purchase) and potential cost savings, for example a potentially cheaper charge by a Discretionary Fund Manager (DFM) as compared to a group of individual SIPP arrangements. However, charges may be higher than for a personal or stakeholder pension

But for the first time ‘families’ have access to a personalised scheme with all the main income options including the attractive scheme pension option. This has the potential to produce a higher starting income than an Alternatively Secured Pension, which can be an advantage if the strategy is to deliver the highest possible income to the member whilst protecting beneficiaries and minimising the tax charge on any remaining fund.

You can then bring underwriting into the equation. This takes into account the actual health circumstances of the customer concerned. So for individuals with a shortened life expectancy their scheme pension may start at an even higher level.

It is also possible for the scheme pension to have a fixed payment period of up to 10 years. This means that on death during that term, payments will still be made to any beneficiary but only taxed as income payments. The payments are therefore subject to income tax rather than inheritance tax as would normally be the case with the remainder of any guaranteed payment under a lifetime annuity. Of course, tax benefits are subject to change and individual circumstances.

The emotional attachment of customers having their own personalised pension scheme that ‘they own’ also came through strongly in the customer testing research groups..

The overarching ‘feel’ of Family Suntrust is that it provides families with a pension scheme for life and will encourage family members to take an interest in pension planning from an earlier age.

Q: Why then do you think this product will appeal to IFAs – what will make them want to sell it?

TM: Family Suntrust is an innovative pension solution that is exclusively for IFAs’ highest value and most important customers. There is a minimum initial investment of £200,000 per Scheme that can be made up of transfer values as well as contributions. It is a very sophisticated pension proposition, with many features and benefits.

It is therefore only available through IFAs and is not sold direct to customers by AXA. The advantages of a pooled fund in conjunction with scheme pensions will require technical understanding by the IFA and clear communication to the customer. This will be a real added value service performed by IFAs to their key customers.

It is essential that the IFA remains involved with the scheme throughout its lifetime as there are many important decisions to be taken. The IFA’s knowledge and experience will be vital. This will allow advisers to build relationships over time and remain part of their client’s financial plans well into the future. In turn, this may provide an introduction to the next generation of family members’ pension (and other investment) requirements.

*** Click here for more on AXA Winterthur Family Suntrust