Trustee Investment Plans: Secure, Long-Term Growth Strategy

Trustee Investment Plans (TIPs) are single-premium investment vehicles for trustees of UK-registered pension schemes, including Self-Invested Personal Pensions (SIPPs) and Small Self-Administered Schemes (SSAS). TIPs offer a range of benefits, such as flexibility in investment terms, the ability to make regular, partial, or full withdrawals, and access to a diverse selection of funds to suit different risk tolerances and objectives. They are designed to facilitate medium to long-term growth, providing an alternative to low-interest trustee bank accounts. TIPs can also serve as a component in retirement planning, offering smoothed funds that help mitigate the impact of short-term market volatility.

Access to a broad range of funds

A Trustee Investment Plan offers access to a broad range of funds, including Prudential's Multi-Asset funds, such as the With-Profits Fund and the PruFund range of funds. These funds are managed by the M&G Treasury & Investment Office (T&IO), who are experts in asset allocation and multi-asset fund management.

The With-Profits Fund and PruFund range of funds are not widely available and offer smoothed returns that provide growth potential, which could help against the effects of inflation. These funds offer an alternative option for medium to long-term (5 to 10 years or more) investments, as opposed to a trustee bank account that may be attracting low rates of interest.

The Trustee Investment Plan allows trustees of SIPPs and Occupational Schemes outside of Prudential to invest in the PruFund range of funds and the With-Profits Fund. These multi-asset funds offer a range of options to suit different attitudes to risk and objectives. They also provide a balance to higher-risk investments in the Scheme.

The PruFund Protected Funds are currently unavailable to new investments. However, the PruFund Protected Cautious Fund and PruFund Protected Growth Fund offer guarantees. At the end of the selected guarantee term, the fund will be worth at least the amount your client invested (subject to charges, enhancements, or withdrawals).

Potential for real growth

Trustee Investment Plans (TIPs) offer the potential for real growth, which can help to offset the effects of inflation. This is achieved through a range of fund options that are not widely available to the general public. These funds, such as With-Profits Funds and PruFund Funds, can provide a balance to higher-risk or illiquid assets held in a trustee's portfolio.

The TIP's ability to generate real growth is further enhanced by its flexibility in investment terms. Trustees can choose from various fund options, including those with different risk profiles, to suit their needs and attitudes towards risk. This flexibility allows trustees to seek growth opportunities that match their specific risk tolerance and investment objectives.

Additionally, TIPs often have no fixed investment term, providing the advantage of long-term investment potential. This long-term focus enables investments to grow over medium to long periods, typically ranging from five to ten years or more. This extended timeframe helps to smooth out short-term market volatility and enables investments to realise their growth potential.

The growth potential of TIPs is also evident in the accessibility they provide to smoothed funds. For example, the LV= Trustee Investment Plan enables pension savers to access their Smoothed Managed Funds, which are designed to deliver low-volatility returns for risk-sensitive clients. These funds are well-suited for cautious investors or those nearing retirement, as they aim to balance growth potential with limiting downside risk.

Overall, Trustee Investment Plans offer a compelling opportunity for real growth by providing access to exclusive funds, offering flexibility in investment terms and risk profiles, and facilitating long-term investment strategies that can mitigate short-term market fluctuations.

Flexibility

Trustee Investment Plans (TIPs) offer a great deal of flexibility for trustees of UK-registered pension schemes and self-invested personal pension (SIPP) schemes. One of the key advantages of TIPs is their flexibility in terms of investment term and withdrawal options. There is no fixed investment term; plans set up from 7 November 2011 have the flexibility to invest for as long as required. This flexibility allows trustees to align their investments with their individual needs and financial goals.

TIPs also offer a range of withdrawal options to suit different circumstances. Trustees can make full, partial, and regular withdrawals from their investments. Regular withdrawals can be made monthly, quarterly, biannually, or annually, providing a stable source of income. There is no minimum withdrawal amount, and the frequency and amount of withdrawals can be adjusted as needed. This flexibility ensures that trustees can access their funds as and when required, providing financial flexibility and peace of mind.

Additionally, TIPs provide flexibility in terms of investment funds. They offer access to a broad range of funds, including multi-asset funds such as With-Profits Funds and PruFund Funds. Trustees can choose to invest in up to six funds under each TIP plan, allowing them to diversify their investments and manage their risk exposure. This flexibility enables trustees to tailor their investment strategies to their specific risk tolerance, financial goals, and time horizons.

The flexibility of TIPs also extends to the minimum and maximum investment amounts. While the minimum initial investment requirement is typically £20,000, trustees have the option to make additional investments of at least £10,000. The maximum investment amount is usually £1,000,000, but higher contributions may be accepted upon request. This flexibility allows trustees to start with an initial investment that suits their financial situation and gradually increase their investment over time.

Furthermore, TIPs offer flexibility in terms of plan designation. For SIPP schemes, the plan can be set up for a named individual, known as a "member-designated" plan. This option provides clarity and personalisation to the investment plan. While plans are typically designated to an individual member at the start of the plan, UK-registered occupational pension schemes also have the flexibility to designate the plan to an individual member if they choose to do so.

Regular withdrawals

One of the main advantages of SWPs is that they allow you to maintain exposure to investment growth while still receiving an income. By only withdrawing a portion of your investments periodically, your remaining funds can continue to grow, potentially resulting in higher returns over time. This approach can be beneficial for retirees who want to balance their current income needs with the potential for future growth.

To determine the appropriate amount for regular withdrawals, it is essential to consider factors such as your age, investment value, inflation, and expected rate of return. Online retirement calculators can assist in this process by helping you estimate the monthly withdrawal amount needed to cover your expenses. These calculators take into account variables such as inflation, taxes, and Social Security.

It is worth noting that the tax implications of regular withdrawals should also be considered. Withdrawals from standard investment accounts are typically taxed as income, while retirement account withdrawals have their own tax structures. Consulting with a tax advisor can help you understand the tax implications of your specific situation.

Added security

Trustee Investment Plans (TIPs) offer added security to investors in several ways. Firstly, they provide an alternative to holding large cash balances in a trustee's bank account, offering the potential for real growth that can help offset the effects of inflation. This growth potential is further enhanced by the ability to invest in a diverse range of funds, including those that may not be widely available, such as Prudential's Multi-Asset funds, With-Profits Fund, and PruFund range of funds. These funds offer smoothed returns, providing growth potential and protection against inflation, which is particularly attractive for long-term investments.

TIPs also offer fund options that cater to different risk tolerances and objectives. For instance, LV='s Smoothed Managed Funds are designed for risk-sensitive clients, offering low-volatility returns suitable for cautious investors with a low to low-medium risk profile. This added security is especially valuable for those nearing or in retirement, as it helps balance growth potential with limiting downside risk.

Furthermore, TIPs provide guarantee options for added security, such as the PruFund Protected Funds, which ensure that at the end of the selected guarantee term, the fund will be worth at least the amount initially invested, subject to charges, enhancements, or withdrawals. These guarantee options provide peace of mind to investors, especially in uncertain economic climates, by protecting their investments.

The flexibility of TIPs also contributes to their added security. Investors have the option to make regular, partial, or full withdrawals without penalties, providing income and liquidity. This flexibility allows investors to cover various payments and costs, such as drawdown payments, loan repayments, and ongoing charges within the scheme.

Overall, Trustee Investment Plans offer enhanced security through growth potential, fund diversity, risk management, guarantee options, and flexible withdrawal options, making them a reliable choice for investors seeking to protect and grow their investments.

Frequently asked questions