Pensions drawdown underpinJanuary 2014

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• Consider you have a client with a large fund subject to IHT at 40%*

• Would you use a Whole of Life plan to cover the charge?

• Now assume you have a client with a very large pension fund, and for all the right reasons you recommend pensions drawdown.

• In the future, the member (and their spouse) will die, then the fund in drawdown will be subject to tax at the 55% recovery charge

• Do you protect that charge?

Consistent approach to planning

*if death estate (including any assets held in trust and substantial gifts made within seven years of death) is over the threshold, IHT will be due at 40%. As from 6 April 2012, people who leave 10% or more of their net estate to charity can choose a reduced rate of IHT at 36%.

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Client aged 60 with a spouse three years younger

Gross designation £600,000PCLS £150,0000Income Drawdown fund £450,000

Max GAD £28,620 (Government Actuarial Department)

Annual income required: £20,000

Quote assumes 2% initial adviser fee and 0.5% trail feePruFunds used 1.45% annual management charge3% gilt yield7% investment return

Figures supplied by Prudential and are based on the Drawdown PlanFor illustrative purposes only

Income drawdown underpin example

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Drawdown example (no underpin) Male draws down £20,000 each year – dies aged 78

Policy holder

Year Age at start of year

Gross annual income

Fund value at end of year

Age at end of year

1 60 £20,000 £443,000 61

3 62 £20,000 £449,000 63

6 65 £20,000 £459,000 66

9 68 £20,000 £471,000 69

12 71 £20,000 £485,000 72

15 74 £20,000 £502,000 75

18 77 £20,000 £524,000 78

Figures supplied by Prudential and are based on the Drawdown PlanFor illustrative purposes only

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Options for the spouse

Drawdown death benefits

Lump sum – 55% tax

Dependents Annuity

Dependents Drawdown

Lump sum – 55% dependents annuity and drawdown

1st death

2nd deathCeases Estate

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Income drawdown – no underpin Policy holder Spouse

Year Age at start of year

Gross annual income

Fund value at end of year

Age at end of year

19 75 £20,000 £532,000 76

20 76 £20,000 £541,000 77

21 77 £20,000 £550,000 78

22 78 £20,000 £560,000 79

23 79 £20,000 £570,000 80

24 80 £20,000 £581,000 81

25 81 £20,000 £593,000 82

Spouse aged 75 - takes income drawdownDesignation £524,000Continues to take income withdrawal of £20,000paDies aged 82

Fund on death£593,000Less 55% tax £326,150Net Fund £266,850Adviser fee £9000

Figures supplied by Prudential and are based on the Drawdown PlanFor illustrative purposes only

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With Whole of Life underpin (Vitality Optimiser premiums)Policy holder

Year Age at start of year

Gross annual income

Fund value at end of year

Age at end of year

1 60 £22,028 £441,000 61

5 64 £22,195 £443,000 65

10 69 £22,424 £446,000 70

15 74 £22,676 £450,000 75

18 77 £22,840 £454,000 78

Spouse 19 75 £22,897 £455,000 82

22 78 £23,074 £459,000 79

25 81 £23,135 £464,000 82

Based on Vitality Optimiser premiumsBronze status achieved each yearPremium added to level income £20,000Adviser EarningsFee £9,000Commission £3,831TOTAL £12,831

Fund on Death£464,000Less 55% tax £255,200Net fund £208,800Plus WoL plan £247,500Total Payable £456,300

Figures supplied by Prudential with PruProtect premiums added and are based on the Drawdown PlanFor illustrative purposes only

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Comparing Benefits

Without Underpin

Annual income £20,000Fund on 2nd death £593,000Less 55% tax £326,150Net Value £266,850

Adviser Fee Initial £9,000+ 0.5% trail

With Underpin

Annual income £20,000Fund 0n 2nd death £464,000Less 55% tax £255,200Net Value £208,800WoL payout £247,500Total payout £456,300

Adviser Fee Initial £9,000WoL commission £3,831Total initial£12,831+ 0.5% trail

Figures supplied by Prudential with PruProtect premiums added and are based on the Drawdown PlanFor illustrative purposes only

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• Same level of income taken by members

• Over 30% more income for the adviser

• Significantly more death benefits available to beneficiaries

Why Drawdown Underpin

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How long to be worse off under Vitality Optimiser

Year Essentials level

Optimiser bronze

Younger life nb Essentials level

Optimiser Bronze

Saving Optimiser Level

1 2,718 2,028 59 2,718 2,028 -

5 2,718 2,195 63 13,952 10,554 3,037

10 2,718 2,424 68 27,184 22,207 4,976

16 2,718 2,730 74 43,494 37,803 5,702

20 2,718 2,955 78 54,367 49,278 5,089

25 2,718 3,074 83 67,959 64,587 3,371

30 2,718 3,074 88 81,551 79,957 1,593

35 2,718 3,074 93 95,143 95,327 -184

40 2,718 3,074 98 108,734 110,697 -1,962

Joint life 2nd Death WOL guaranteed premiumLife cover: £247,500Essentials premium: £2,718.36 Optimiser premium: £2,100.12

Optimiser premium (less £3 monthly fee- which is subject to change) changes each year on a guaranteed basis dependent on Vitality status: Bronze: 2%

Silver: 1%Gold: No changePlatinum: 1% reduction

Premium charges apply up to the plan anniversary immediately prior to the youngest policyholder’s 80th birthday. Premiums remain level thereafter.

Figures rounded to nearest £ Based on PruProtect premiums, 2013For illustrative purposes only

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Drawdown underpin – level vs VO premiums Joint life 2nd death (spouse 3 years younger) Essentials WOL Premiums

Designated fund after PCLS

Potential tax LSDB 55%

Attained M55 F52 AttainedM60/F57

Attained M65/F62

NBM70/F67

£300,000 £165,000 £1,435 / 0.48% £1,856 / 0.62% £2,426 / 0.81% £3,012 / 1.00%

£500,000 £275,000 £2,396 / 0.48% £3,007 / 0.60% £3,942 / 0.79% £4,904 / 0.98%

£700,000 £385,000 £3,302 / 0.47% £4,150 / 0.59% £5,448 / 0.78% £6,783 / 0.97%

£1,000,000 £550,000 £4,650 / 0.47% £5,850 / 0.59% £7,686 / 0.77% £9,576 / 0.96%

Indemnity commission (£500k) £3,819 £4,793 £5,736 £4,801

Designated fund after PCLS

Potential tax LSDB 55%

Attained M55 F52 AttainedM60/F57

Attained M65/F62

NBM70/F67

£300,000 £165,000 £1,104 / 0.37% £1,457 / 0.49% £2,004 / 0.67% £2,591 / 0.86%

£500,000 £275,000 £1,740 / 0.35% £2,315 / 0.46% £3,211 / 0.64% £4,173 / 0.83%

£700,000 £385,000 £2,370 / 0.34% £3,168 / 0.45% £4,410 / 0.63% £5,744 / 0.82%

£1,000,000 £550,000 £3,308 / 0.33% £4,437 / 0.44% £6,192 / 0.62% £8,079 / 0.81%

Indemnity commission (£500k) £3,150 £4,238 £5,404 £4,741

Level

VO

Comparison of first year premiums only Based on PruProtect premiums, 2013For illustrative purposes only

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A fair approach to risk

Integrated health and wellness programme built into protection

Immediate incentives and rewards

Premiums can change each year depending on engagement

Up to 40% discount in first year* Creating a new generation of protection

A scientific foundation to encourage and reward healthy living

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3

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Regular behavioural nudges

Cashback every year

Vitality Plus rewards automatically included**

Vitality Optimiser

*compared to our standard protection premium **as part of the £3 fee with Vitality Plus benefit

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If you’ve done enough to look after your health by the end of each year, we will send you cash back to reward you for your efforts

SILVER GOLD PLATINUM

Double Cashback for PruProtect and PruHealth members:

Single life policy

Joint life policy

£100 £150 £200

£200 £300 £400

An extra incentive to be healthy

A protection industry first

Joint life policy

£50 £75 £100

£100 £150 £200

Single life policy

Cashback every year

Any cashback we give you may be subject to tax. This might affect your personal tax position. If you have any questions about this, please contact a Financial Adviser or HM Revenue & Customs (hmrc.gov.uk).

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An integrated health and wellness programme

Vitality Plus £3 per month

A platform to engage, improve health and get benefits

50% off Up to 75% off And more discounts

Free cinema ticket each week

50% off monthly gym membership

And more…

Vitality Plus benefits* included:

Vitality optimiser benefits

*Terms and conditions apply

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• 50% off cost • Full price £682 reduced to £341• Boosts members vitality points

• Tests include– See doctor and physiologist– Cholesterol tests– Full blood works– Body composition– Spinal assessment– Active cardiovascular tests - ECG

Attends Nuffield 360+ Health Assessment

Figures correct as at 01/2014

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• Health Screen included Prostate Specific Antigen (PSA) and the results were slightly raised indicating the need for further tests.

• A Biopsy confirmed early stages of Prostate Cancer

• Early treatment can now be started (and has a much better chance of success)

• If he had Serious Illness Cover with Pruprotect a payment would be made

• He can also consider securing a higher level of income by looking at enhanced life annuities as a further planning option

Results

Better planning, enhanced security, more engagement

Better planning, enhanced security, more engagement

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• Enhanced client proposition• Enhanced client security and peace of mind• Enhanced revenue per client• Enhanced cash-flow• Enhanced embedded value of your business• Reduced consumer risks within the business• No longer an “average” wealth adviser

Why you should consider Wealth Preservation:

Good for you, good for your clients

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PruProtect – providing in depth support

F2F supportExperienced

consultant with wealth background

Specialist support

Training HNW proposition Advice led proposition

Tools and support pre / at / post sale

Local field based consultants

Outsourced solutions

Thank you