VERSION 2: February 2016
SIPP REASONS WHY
FOR SUITABILITY LETTERS
This ‘Reasons Why’ document provides you with statements about particular features of the Old Mutual
Wealth SIPP to help you compile your suitability letters.
To construct your suitability letters you will need to copy and paste text into your own letter.
As a financial adviser, you’ll need to consider guidance by the regulators about the letter’s presentation,
style, personalisation and content.
A suitability letter must show a clear link between an individual customer’s needs and the recommended
product, and that the advice you give and the factors on which you base your advice are suitable. Other
issues you may wish to consider are affordability, alternative needs or products and the basis for choosing
the term.
Separate company ‘reasons why’ paragraphs are also available which provide statements about particular
features of the services offered by Old Mutual Wealth, to help you compile your recommendation letters.
Please note that Old Mutual Wealth cannot accept responsibility for this text meeting your own regulatory
requirements. You should arrange for the necessary approval within your own firm.
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PRODUCT OVERVIEW

The Old Mutual Wealth SIPP
The Old Mutual Wealth Self Invested Personal Pension (SIPP) is a sophisticated and cost-effective
alternative to a conventional personal pension scheme giving you flexibility in how you invest your
pension fund assets. It can accept regular and single contributions and transfer payments (excluding
in-specie transfers from SSAS). The money that is paid into your SIPP can be invested in a range of
investments permitted by HM Revenue & Customs.
PRODUCT BENEFITS

Expert administration
In order to ensure a top quality level of service and administration, Old Mutual Wealth has carefully
selected a specialist administrator and trustee to run the Old Mutual Wealth SIPP.
Old Mutual Wealth has chosen AJ Bell Management Limited, a part of the AJ Bell Group – a leading
firm of consulting actuaries with specialist expertise in providing actuarial, trustee and administration
services for self-administered pension schemes. Sippdeal Trustees Limited, a wholly owned subsidiary
of AJ Bell Management Limited, is Trustee of the Old Mutual Wealth SIPP. As at March 2015 AJ Bell
had assets under administration exceeding £26.1 billion with over 111,500 customers

Simple and competitive charges
The charges associated with setting up and administering your SIPP are all charged as set cash
amounts that are simple and easy to understand. They are the same regardless of how much your
SIPP is worth. The charges are made by AJ Bell for the time and expertise required to effectively run
your SIPP.
Old Mutual Wealth has negotiated a competitive fee structure with AJ Bell for administering your
SIPP.

Tax relief on contributions
There is no limit on the amount you can pay into your pension, however there is a limit on the
amount of tax relief you can claim on these contributions and you may incur a tax charge if you
exceed the Annual Allowance.
You will get tax relief on your personal payments up to the greater of £3,600 and 100% of your
earnings chargeable to income tax.
You will not get tax relief on the following:
o
employer contributions
o
transfer payments from other registered pension schemes
Contributions above these limits can be made to registered pension schemes, but will not be eligible
for tax relief. The Old Mutual Wealth SIPP will only accept contributions eligible for tax relief.
You will get income tax relief at the basic rate on what you pay into your pension (up to the limits
mentioned above), regardless of whether you pay tax. This means that if you wish to make a gross
investment of £1000, you will pay £800 and currently HM Revenue & Customs will pay 20% of your
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gross pension contribution i.e. £200 in this example to your Old Mutual Wealth SIPP to make up the
gross investment.
If you are entitled to higher or additional rate tax relief on the contribution you wish to make, you will claim
the additional tax relief directly from HM Revenue & Customs.
If you are, or become, a higher rate taxpayer, you can reclaim a further 20% of your gross contribution
through your self-assessment tax return. If you are an additional rate taxpayer you can claim a
further 25% of your gross contribution in this tax year.
With the benefit of the tax relief, you are only paying £80 of the £100 contribution, or £60 if you are a
higher rate taxpayer. All contributions are paid net of basic rate tax.
Although there is no limit on the amount that you can pay into your pension, if the total contributions
to all registered pension schemes exceed an amount known as the Annual Allowance you will be
liable for a tax charge of up to 45% on the excess. For the 2015/16 tax year the normal limit is set at
£40,000, if however you have, at any time from the 6th April 2015 accessed income from any existing
registered pension scheme, the Annual Allowance will be limited to £10,000 for the tax year in
question. Any Annual Allowance tax charges will be dealt with through your self-assessment tax
return.

The Lifetime Allowance
You can build up a total pension fund from all registered pension schemes up to the standard
Lifetime Allowance. For 2015/16 this is set at £1.25 million which is set to reduce from the 6th April 2016
to £1 million. Some people may have a higher personal Lifetime Allowance.
If you exceed your personal Lifetime Allowances, you will be liable for a tax charge which will be
deducted from your plan. Any funds in excess of the Lifetime Allowance are taxed at 25% if the
excess funds are used to provide a taxable income, and 55% if paid as a lump sum.

Tax on investments
Currently your fund will accumulate free of any liability to UK income tax or capital gains tax,
although tax deducted at source on dividends from UK equities can no longer be reclaimed.

Freedom and flexibility
The Old Mutual Wealth SIPP allows you maximum flexibility in your choice of investment.
Your SIPP assets, , are held in trust, where both you and Sipp deal Trustees Limited are the trustees.
This gives you a greater amount of control than for many other SIPPs available, where all the assets,
including property, are often under the sole legal ownership of the professional trustee.
Old Mutual Wealth, direct investments into Old Mutual Global Investors and the cash account held
within the Old Mutual Wealth SIPP are held under a master trust in the name of Sipp deal Trustees
Limited. This is a common approach within the market. However, unlike other trustees, Sipp deal
Trustees Limited will delegate investment powers to you, which will allow you to, among other things,
change and surrender investments without needing their signature.
Some of the ways your SIPP can be invested include:
o
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UK quoted stocks, shares, gilts and debentures
o
o
o
o
o
Shares quoted on the Alternative Investment Market (AIM)
Stocks and shares traded on a recognised overseas stock exchange
Authorised unit trusts, investment trusts and OEICS
Insurance company funds
Commercial property and land
Certain categories of investment are not permitted or are deemed as ‘wasting assets’ by HM
Revenue & Customs (wasting assets are not accepted by the Old Mutual Wealth SIPP) and these
include:
o
o
o
o
Residential property and associated land
Personal chattels, capable of private use
Loans to any party
Unquoted company shares
One potentially very useful and attractive feature of a SIPP is the ability to purchase a commercial
property.
The Trustees can then lease the commercial property to an unconnected third party or your business
on commercial terms with the rent being re-invested in your pension fund. The Trustees are also able
to borrow funds from a commercial lender to assist with the acquisition of a property.
HM Revenue & Customs sets limits on the amount the Trustees may borrow. Currently it is possible to
borrow an amount up to 50% of the net value of the assets held within the SIPP.
PAYMENT OF YOUR BENEFITS
The Old Mutual Wealth SIPP offers you a variety of options on retirement, and to your spouse,
dependants or nominated beneficiaries in the event of your death. Since the introduction of the
additional income freedoms introduced from 6th April 2015, the options available under the Old
Mutual Wealth Sipp have been widened to allow you to have greater flexibility as to how you can
take income from your Old Mutual Wealth SIPP investment to meet your ongoing retirement income
needs. There is also a greater choice of options as to how any value remaining on your death can
be passed onto your beneficiaries

Retirement
You can take benefits from your SIPP at any time after age 55 under current legislation. You can use
all or part of your fund to take a tax-free cash lump sum and/or income.
You can withdraw benefits from your Old Mutual Wealth SIPP even if you decide to keep working.
You may take part of your pension fund as a tax-free cash sum, rather than using the entire fund to
buy a retirement pension, which is taxed. The maximum tax-free cash sum you can take is normally
up to 25% of the pension fund at the time you want to start taking income from your SIPP..

Annuity purchase
When you decide to start withdrawing benefits from your Old Mutual Wealth SIPP, one option is to
use all or part of your fund to purchase an annuity.
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This involves passing your fund (after payment of your tax-free cash sum) to an annuity provider of
your choice who, in return, will provide you with a regular income throughout your life. You may be
able to include a range of options with your annuity, eg annual escalation of income, payment
guarantee period, surviving spouse or dependant’s pension, capital protection. It may also be
possible to obtain higher income rates with an ‘impaired life annuity’ if you are in poor health.
The annuity available will depend upon the value of your fund, the options you choose and annuity
rates at the time of purchasing the annuity.
The annuity provider will usually pay the income to you net of tax and will deal with all aspects of
PAYE.
There can be advantages to using income withdrawal rather than buying a pension annuity.

o
Funds that remain in the SIPP will continue to be invested with the potential of further tax
advantaged growth.
o
It is more flexible than the conventional annuity approach.
o
If annuity rates are low compared to previous years, Income Withdrawal will give you the
option of waiting to see if rates improve, although there is a risk that rates could fall.
o
You can choose to take no income, or vary the income up to whatever level you need, or,
should you be taking withdrawal under capped drawdown, the maximum set by HM
Revenue & Customs, according to your needs at the time. You should remember that the
greater the income you take, the higher the risk is that your fund will diminish. In comparison,
an annuity where the future income format is fixed and cannot be changed once started.
o
You can continue taking income withdrawals after age 75.
Flexi- Access Drawdown
This facility will allow you to take income from your retirement fund at any level you decide.
When used in conjunction with the phased retirement option, flexible drawdown can allow you to
minimise the funds you need to use to provide your immediate income needs. allowing you to optimise
the death benefits your beneficiaries might receive..
Under this option, you are able to take:



all your tax-free cash at outset without having to buy an annuity with the remaining fund.
This is useful if you need access to the lump sum, but don’t need the level of income the
remaining fund would buy in the form of an annuity. It can also help if you don’t want to be
committed to buying an annuity yet.
Take tax-free cash from part of your fund and moving an amount equal to 3 times the tax
free lump sum you access into drawdown for providing income, leaving the remaining fund
untouched for future use, from which you will be able take further tax-free lump sums, within
your personal Lifetime Allowance as and when you need
Capped Drawdown
You may have started income withdrawals prior to 6th April 2015 under what is known as
capped drawdown, where the annual amount of income that could be taken was restricted by
rules laid down by HM Revenue and Customs.
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This option is no longer available if you are only starting to draw from your Old Mutual Wealth
SIPP. However if you are using this option with another scheme at present but wish to transfer to
the Old Mutual Wealth SIPP, the SIPP can accept capped drawdown transfers to allow the
facility to continue until you instruct otherwise.
The capped drawdown facility within the Old Mutual Wea.th SIPP will allow you to:



Convert the facility to flexi-access drawdown at any time
Allow, on request for an annual review of the maximum annual capped drawdown
income that could be available to you, which if accepted remains available to you until
the next statutory review of the maximum income (due every 3 years before you reach
age 75 (and annually if you are aged over 75)
Where your capped drawdown facility started on or after 6th April 2006 and you have
unused pension savings, to allow your capped drawdown income to be –re-based at
any time in a statutory review period and for the new limit to be applicable for the
remainder of that period.
This flexibility highlighted in the last two points above may allow you to deliver the income you want whilst
be able to retain the ability to fund further contributions prior to your 75 th birthday, using the normal Annual
Allowance of £40,000 a year
Taxable Lump Sums
You may only wish to take a lump sum from our untouched savings within the Old Mutual Wealth SIPP.to
meet a one-off income need. The Old Mutual Wealth SIPP will allow you to do this, either separately, or in
conjunction with flexi-access drawdown.
If you wish to use this facility 25% of the payment will be tax-free, the balance being subject to your
marginal rate of income tax in the tax year the payment is received by you. You should be aware of the risk
that larger payments of this nature could subject part, or all of the income element to higher level s of
income tax liability than you would expect.

Phasing access to your retirement savings
Your Old Mutual Wealth SIPP gives you the option of taking benefits gradually if you so wish. This
allows you to take partial benefits whilst continuing to make contributions.
The advantages of a phased retirement approach are:
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o
A more flexible way of providing pension benefits at retirement as you do not need to take
your entire fund when you retire.
o
Part of your retirement fund remains invested with the potential to grow almost entirely taxfree – giving you the possibility of a bigger fund to buy pension benefits later.
o
It allows you to put off committing your entire fund to buying an annuity. This may be of
benefit because once you have bought an annuity you can’t change the basis that you
bought it on. What might have been right a year ago may not be right now.
o
Annuity rates improve as you grow older so you could possibly buy more with your pension
fund if you delay buying an annuity, although there is a risk that rates could fall.
o
By keeping some of the fund in your pension, you may increase the value that can be
passed onto beneficiaries in the event of your death than might have been available had
you purchase an annuity.
o

If you phase into income withdrawal, your income levels can be tailored to suit individual
circumstances, but you should remember that the greater the income you take, the higher
the risk that your fund will diminish and may not enable you to sustain the level of retirement
income you may need for the long terms.
Death benefits
The Old Mutual Wealth SIPP can be an important part of your inheritance tax planning.
The whole amount of your SIPP can normally be used to provide your spouse/civil partner*,
dependants, or other beneficiaries you have included in your Expression of Wish with a pension
income or a cash sum in line with HM Revenue & Customs practice and Scheme Rules.
The tax position on death will depend on your circumstances at the time. As a general rule the
following applies. The value of your Old Mutual Wealth SIPP will normally be free of any Inheritance
Tax liability whenever you die. The tax treatment of the remaining value of your Old Mutual Wealth
SIPP paid to beneficiaries after you die will however depend on the age at which the event occurs.

If you die before age 75, any lump sum benefits payable to beneficiaries will be paid tax-free.

If you die after age 75, any lump sum benefit payable to beneficiaries will, from 6 th April 2016, be
subject to their marginal rate of income tax in the tax year of payment.

The Old Mutual Wealth SIPP also provides your spouse/ civil partner, financial dependants, or any
other individuals you have included in your Expression of Wish with the option to be provided
with an income withdrawal facility through a separate Old Mutual Wealth SIPP)

If you die before age 75, there will be no income tax liability on any withdrawals a beneficiary
may take from their income withdrawal facility. If you die after 75 any withdrawals made by a
beneficiary from their income withdrawal facility will be subject to income tax at their marginal
rate in the tax year they receive the payment.

The value of any pension savings that are held in a beneficiary drawdown facility are in addition
to that persons own Lifetime Allowance in respect of pension savings they are directly building
up
If you have already purchased an annuity then any death benefits will be dependent on the Terms
and Conditions set out in the annuity contract.
An individual who, on your death, is neither married to you nor one of your children but who, in the opinion
of the scheme administrator:
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o
was financially dependent on you
o
his/her financial relationship with you was one of mutual dependence
o
was dependent on you due to physical or mental impairment.
Income will stop if a dependant no longer qualifies for withdrawals.
* As defined by the Civil Partnership Act 2004.
If you select this facility you will not be able to make further contributions to any registered pension
scheme and will have to have opted out of pensionable service in respect of any final salary
scheme of which you are currently a member.
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This communication is designed for and directed at professional financial advisers. It should not be relied on
by consumers.
Please note that Old Mutual Wealth cannot accept responsibility for this text meeting your own regulatory
requirements. You should arrange for the necessary approval within your own firm.
Full details of the SIPP can be obtained from your financial adviser.
Your investment may fall or rise in value and you may not get back what you put in.
The Old Mutual Wealth SIPP is administered by AJ Bell Management Limited, part of AJ Bell. Telephone: 0845
373 3470 Fax: 0845 543 2601 E-mail: oldmutualwealthsipp@ajbell.co.uk
AJ Bell Management Limited is registered in England and Wales at Trafford House, Chester Road,
Manchester M32 0RS. Registered number 3948391. AJ Bell Management Limited is authorised and regulated
by the Financial Conduct Authority.
Sippdeal Trustees Limited is the Trustee of the Old Mutual Wealth SIPP. Sippdeal Trustees Limited is a wholly
owned subsidiary of AJ Bell Management Limited. The Old Mutual Wealth SIPP is distributed by Old Mutual
Wealth Life Assurance Limited. Old Mutual Wealth investment products and services are provided by Old
Mutual Wealth Life Assurance Limited and Old Mutual Wealth Limited Registered numbers: 1363932 and
1680071 respectively England. Registered Office: Old Mutual House, Portland Terrace, Southampton, SO14
7EJ, United Kingdom. Old Mutual Wealth Life Assurance Limited is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Old
Mutual Wealth Limited is authorised and regulated by the Financial Conduct Authority. Their Financial
Services register numbers are 110462 and 1680071 respectively. VAT number 386 1301 59.
PDF10756/216-0247/February 2016
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