New Sipp by-pass trust from fidelity fundnetwork aims to cut IHT liabilities from Sipp death benefits

London, 01 August 2008 - Fidelity FundsNetwork™ has launched a SIPP By-Pass Trust to help advisers tackle the increasingly complex tax burden faced by their clients. Designed to be used in conjunction with the FundsNetwork SIPP, the By-Pass Trust can protect a client’s SIPP lump sum death benefits from a future charge to IHT on the death of their spouse. The trust can be established at the same time as setting up a SIPP or at any pre-retirement point thereafter.

A particular problem can arise, where following the pre-retirement death of a SIPP member; death benefits are paid to the surviving spouse. Whilst, there is generally no IHT to pay at that time, the problem arises in that the death benefits increase the value of the spouse’s estate. This means that on the spouse’s death the lump sum benefits, if unspent, are then potentially subject to a 40% IHT charge.

The new SIPP By-Pass Trust seeks to overcome this by ensuring that the lump sum death benefits do not become part of the spouse’s estate, whilst at the same time ensuing the spouse is still able to benefit from them during his/her remaining lifetime. The member nominates the trust to receive the death benefits, which allows a wide range on potential beneficiaries, including the spouse to benefit from it.

Paul Kennedy, Head of Tax and Trust Solutions, FundsNetwork, comments: “Feedback from advisers combined with the success of our SIPP meant that developing the new SIPP By-Pass Trust was a natural extension to our range of Multi-Asset Trusts. In essence, it’s a very simple trust that can save a considerable amount of IHT. It’s likely to be particularly suitable for married couples although as ever with IHT planning, there are a number of technicalities of which the adviser should be aware. As we do with all our trusts, we have also produced a very comprehensive guide to accompany the trust itself”

An example of how this works:

  A tax saving thus an improvement in funds available
to the beneficiaries of £80,000
(40% of £200,000) has been secured.

*It is assumed that Jack uses none of his nil rate band on the first death and so Jill has a double nil rate band (assumed to be £624,000) on her subsequent death.
†The assets (excluding any growth) of the FundsNetwork SIPP By-Pass Trust remain at £200,000 i.e £100,000 that has always been in trust and £100,000 repayable from Jill’s estate.

The FundsNetwork SIPP By-Pass Trust
*The SIPP By-Pass Trust has been developed in response to adviser demand and recognition that FundsNetwork with its 7%** share of the SIPP market has a large proportion of clients who may find such a trust beneficial.

The new trust is the eighth addition to the range of FundsNetwork Multi-Asset Trusts:

• The FundsNetwork Bare Gift Trust
• The FundsNetwork Discretionary Gift Trust
• The FundsNetwork Bare Loan Trust
• The FundsNetwork Discretionary Loan Trust
• The FundsNetwork Bare Discounted Gift Trust
• The FundsNetwork Discretionary Discounted Gift Trust
• The FundsNetwork Excluded Property Trust
• The FundsNetwork SIPP By-Pass Trust

For more information, please visit: www.fundsnetwork.co.uk or call 0800 995511.
FIL Limited and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. FIL Limited manages a total of £130.4 billion of assets***. Notes to editors:
_{* Source: Fidelity/Morningstar UK Retail Prices Index (RPI) April 1999 to 3 March 2008
**Source: Fidelity as at 31.12.07
FundsNetwork, Fidelity’s fund platform, was launched in June 2000. It offers advisers and their clients the ability to invest, manage and monitor their investments in one place, bringing them control, efficiency and new business opportunities. The FundsNetwork service is offered and managed by Financial Administration Services Limited. FundsNetworkTM is a trademark of FIL Limited. The Fidelity ISA is offered and managed by Financial Administration Services Limited. The value of tax savings and eligibility to invest in an ISA will depend on individual circumstances and all tax rules may change in the future. Any opinions expressed are made at the time of writing and can be subject to change without notification. The value of investments and the income from them can go down as well as up and an investor may not get back the original amount invested. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Assets as at 31.12.07 are those of FIL Limited (FIL).}