SIPP solves family and business problems

Our fictional adviser’s dancing days are over but he is still consumed by some tricky moves. On this occasion, John Dunn of James Hay imagines an earmarked Sipp coming to the rescue.

Heaven knows I’m miserable now, thought Graeme. It was Saturday night and he had pulled. Twenty years ago this would have meant he had hooked up with a young lady down the local nightclub but now, unfortunately, it was a muscle in his lower back.

As well as his back, and anti-forestalling provisions causing him distress, he had another problem. A valued client, Archibald Shankly, had presented him with a set of circumstances and was looking for Graeme, his IFA, to come up with a solution.

Archie’s company is just about to embark upon an ambitious expansion programme. Archie’s sons, both in their early 30s, are also directors of the company and he is convinced that this programme will help secure the long-term future of the company. He is hoping to retire in the next five years and wants to do so in the knowledge that the company is in a healthy state.

To provide for his retirement a SSAS was established a number of years ago and at the present time he and his two sons are the only members. Although the ability to invest in the sponsoring employer exists under the SSAS, and this might prove useful, Archie is uncomfortable with his retirement fund being too dependent on the success of the company.

Conflicts over investment strategy

As trustees of the SSAS, Archie and his sons undertake their duties in a diligent manner. However, investment choice is causing tension. The problem is that Archie, as he nears retirement, wants to reduce risk whereas his sons favour assets that will show a better return over the longer term ie higher-risk investments.

This conflict and the likelihood that the demands on the time of Archie and his sons will increase dramatically if the expansion of the company goes as expected are a source of concern for Archie. Neglecting scheme matters could prove costly for Archie given his proximity to retirement and he desperately wants a solution to the scheme investment problem to maintain the good relationship he has with his sons.

Sipp to the rescue

Graeme sat pondering Archie’s predicament in the study/dog house with little success when Mary came in. ‘Well frankly Mr Shankly, that’s it,’ cries Graeme. ‘That’s what?’ says Mary. ‘The answer to Archie’s dilemma,’ comes the reply.

Archie and his sons should transfer to the same Sipp scheme at the same time for the following reasons: