A combined platform and investment solution for retirement benefit structures
Employer-financed retirement benefit schemes (or EFRBS as they
are commonly known), arose out of tax legislation reforms which
occurred in 2006. EFRBS are now often being used in place of
other retirement benefit structures because this type of structure
retains the advantages offered by a pension, but removes a number
of onerous restrictions and extends additional benefits to the
corporate sponsor. The recent popularity of this type
of scheme has led Fairbairn Private Bank to innovate and develop a
solution which combines a delivery platform and investment services
to precisely meet the requirements of the trustees of EFRBS.
From an investment perspective, the trustees of EFRBS have two
main imperatives. First, to oversee the investments made by
the members into their pensions to ensure suitability and
performance; and then to source an appropriate investment platform,
which might include execution-only (self-select) as well as
discretionary (default-managed) choices for their members.
Fairbairn Private Bank has the ideal solution for this
scenario. We are able to combine our Focus platform and our
investment services to provide a turn-key solution for trustees of
retirement benefit schemes. Clearly, the integration of these
two elements is attractive, but the addition of a tiered online
viewing capability makes this a truly advantageous solution.
The Focus platform combines cash management, custody,
discretionary investment management services, lending and currency
accounts. This platform allows the layering of accounts so
that a ‘trustee master account’ and ‘scheme member accounts’ can be
created with differing profiles. The master account transfers
funds into the scheme member accounts, and the online facility
provides the trustee with access to view the whole structure
(trustee master account and scheme member accounts). In
addition to this, the scheme members themselves are able to view
their own individual account online and review the ongoing
performance of their investments. This means that scheme
members don’t need to wait for their periodic statement to see how
their investments are allocated and performing, and also means they
are able to suggest changes to this allocation at any point, albeit
leaving the final decision to the trustees.
One of the main issues for trustees is that they face the
onerous task of selecting appropriate investments for each scheme
member. Fairbairn Private Bank has the investment expertise
to deliver advice to trustees for them to narrow the universe of
opportunities available to scheme members. We then deliver a
‘white list’ of qualified opportunities to the trustees of the
scheme. Trustees can be comfortable in the knowledge that,
given our understanding of investment markets, the list provided
has been fully scrutinised and will be monitored on an ongoing
basis.
Self-select investment options are passed to members, allowing
them to select appropriate choices in tandem with their own IFA as
appropriate. Understandably, and in view of their fiduciary
responsibility, trustees require execution only choices to be
appropriate for pension investments and require an investment
manager to help create a list that includes default choices for
members in addition to those available on an execution-only
basis. Scheme members then select either a default option or
choose specific investments appropriate to them. A number of
default options can be provided which alter in risk profile
depending on the number of years until retirement – all else being
equal, the risk appetite for a pension saver will reduce as they
approach retirement as capital preservation becomes the
priority.
This innovative approach is currently available in two formats,
although a fully bespoke solution can also be developed with
appropriate fees dependent on the size and type of structure
required. The simple version is where trustees are looking
for the functionality of the Focus platform but do not require
investment advice, with standard Focus account fees charged.
The turn-key solution combines the Focus platform with execution
only or discretionary investment management (including the
investment white list and default risk options). For this
service we propose a ‘wrap fee’ for all services as a percentage of
total assets.
To find out more about this service and explore other options
available, please contact our client services team on +44 (0) 1624
645000.
The range of investments within EFRBS structures carry different
types of risk. As with any investment, the price of, value of, or
income from your investments can fall as well as rise and you may
not get back the original amount invested. Past performance is not
necessarily a guide to future performance and exchange rate changes
may affect the value of your investments.