Canada Life International adds to market leading RDR proposition

Canada Life International Limited (CLI) is delighted to announce an update on the range of adviser charge payments which can be made from their range of Discounted Trust Accounts.

CLI’s Discounted Trust Accounts will now allow:

  • Initial adviser payments before the policy is set-up
  • Ongoing adviser charge payments as a monetary amount or a percentage of the value of the account
    • Minimum and maximum monetary limits to be set for ongoing adviser charge payments which are taken as a percentage

The changes are backed by a new Counsel’s Opinion to ensure that the availability of adviser charge deductions will not compromise the effectiveness of the trust.

Why is it important to facilitate ongoing adviser charge payments?

Trustees have a duty to manage the money they are responsible for and this includes the provision of professional advice where appropriate, but the question post RDR now arises, how do they pay for that advice?

Previously this would have been through a trail or servicing commission paid by the product provider, however, commission payments are no longer allowed in the Post-RDR world. This poses a problem for trustees. They need to be able to take and pay for professional advice, but in some instances will not have access to money with which to pay for it.

The settlor can pay for the advice given to the trustees, however, this may be classed as a further gift for inheritance tax purposes, using up any gift allowance or being a potentially exempt transfer or chargeable lifetime transfer. This is not ideal as this could commit the settlor to gifting for many years. Whilst a settlor may not mind this commitment, it may discourage others.

Sean Christian, Managing Director, Canada Life International said:

“The availability of an ongoing adviser charge facility is a key option when an adviser considers a discounted gift trust provider. The availability of an ongoing adviser charge allows the trustees to pay for the advice they receive.

“We believe that we are currently the only offshore company who can offer such a wide range of adviser charging payment options on discounted trust arrangements. Not only can we offer initial adviser charging before policy set-up as either a monetary or percentage amount but we also have flexible ongoing adviser charge deductions, again including monetary and percentage amounts as well as minimum and maximum limits.”

Mr Christian added:

“Additionally, we have obtained a new Counsel’s Opinion to ensure that the availability of adviser charge deductions will not compromise the effectiveness of the trust. This will help give clients, trustees and adviser the peace of mind of knowing that the product structures have been reviewed in light of the current legislation.”

Notes to editors

How does it work?

Initial adviser charge deductions – once the money is inside the product it is owned by the trustees and therefore should not be used to pay for the fees incurred by the settlor. The only option is to make the payments before the policy is set-up (also known as provider-facilitated)

Ongoing adviser charges – any ongoing adviser charges can be taken monthly, quarterly, half-yearly or yearly, although monthly is only available where a monetary amount has been selected.

Amounts are deducted as part of the 5% tax deferred allowance along with the income payments to the settlor. If the combined amount exceeds the 5% allowance then a tax liability could arise.

The availability of the maximum limit is therefore an excellent feature allowing a percentage basis ongoing adviser charge capped to help avoid any unwanted chargeable gains.


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