Aviva will allow your clients to place their pension portfolio account into a trust so that any lump sum death benefits will be paid directly to trustees they appoint.
Aviva revealed adviser's clients can now use the Aviva Pension Portfolio Trust to appoint their own trustees who will decide which of their beneficiaries will receive benefits from the trust, and when, plus give them a letter of wishes outlining how they would like them to use the funds.
The trust allows adviser's clients to nominate the ultimate destination of their pension fund rather than leave it to the discretion of scheme administrators.
The provider pointed out advisers and their clients would have to regularly review the trust to make sure that is remains suitable and added the trust was suitable where the beneficiaries nominated were not an obvious choice to someone who does not know you (for example, if you are married with children but ask for the fund to be passed to someone else) and for those who want to avoid vulnerable beneficiaries inheriting directly.
The provider also stated the trust was useful where beneficiaries are handicapped and in receipt of means-tested state benefits or where beneficiaries are at risk of divorce or bankruptcy.
The trust also allows adviser's clients to make provision for as yet unborn beneficiaries, for example grandchildren.
It allows you to tell the trustees what you would like to happen for successive beneficiaries - for example, your client's trustees can provide funds to your second spouse but on their death can pay any remaining funds to their children.
Tim Orton, chief executive of Aviva Adviser Platform, said: “The Pension Portfolio Trust could be the suitable choice, for example, if a client wants to ensure that their nominated beneficiary can benefit during their lifetime, but they also want to be able to choose who the remaining capital will be passed to on their death.
"This is a scenario which will be familiar to many advisers helping their clients with later-life planning.
“It is also suitable where there are vulnerable beneficiaries, for instance if they are handicapped and receiving means-tested state benefits, or where there’s a risk of divorce or bankruptcy."
In addition to this, Aviva will continue to offer the expression of wish, typically in conjunction with flexi-access drawdown, which it argued remains suitable for clients who are happy that their nominated beneficiary receives access to their share of the fund, and then chooses who will receive any funds remaining on their subsequent death.
Alan Lakey, director of Highclere Financial Services, said Aviva allowing a pension to be placed in a trust was welcome news because most expression of wish arrangements offer limited flexibility.
He said: "Hopefully this is a lead that other players will follow. With savers living longer and with the added option available within drawdown arrangements, this is a timely improvement."
Dennis Hall, managing director of Yellowtail Financial Planning, said: "My concern here is that people may well establish these trusts without taking professional advice, or relying on the advice of their financial adviser who is unlikely to have legal training.
"They talk about the removing the scheme trustees from the decision making process, but at the time the benefits become payable, the scheme trustees would need to direct the pension fund into the trust, something which must remain within their discretion. I would recommend taking legal advice over using something like a 'one-size fits all' style of trust. I don't imagine Aviva will be taking any responsibility for the advice surrounding the trust, so it would necessitate seeking advice anyway in my opinion."
stephanie.hawthorne@ft.com
