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 your relationship
manager directly or 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.