Introduction - Wrap Accounts

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Wrap Accounts

What are Wrap Accounts?

Wrap Accounts are a method of pension investment that has only recently become available to people in the UK . The concept is by no means new, and wrap accounts are popular in America , New Zealand and South Africa . Several have now been launched in the UK .

What do wrap accounts do?

Wrap accounts allow private investors to centralise their personal pension and investment portfolios into one place. However, they are not investments themselves, and the investor does not make money. Instead, the provider holds and sometimes manages investments. Wrap accounts generally allow investors to take full advantage of all tax benefits with their investments, including ISAs, PEPS, and personal pensions. Wraps have three major components: tax wrappers, any investments, and a front-end system from which people can access investments.

Are their sterling-specific wrap accounts?

The first sterling specific wrap accounts are becoming more common. Before this, all wrap accounts were denominated in US dollars, and only invested in UK stocks. International wrap accounts are also becoming a reality.

What can investors put into their wrap account?

Investors can in theory place any type of investment into a wrap, including pensions. However, some wraps are restricted to certain providers. A number of investments can be held in wraps, including Peps and Sipps.

Once the investments are wrapped, what happens to them?

The provider of the wrap account manages the client’s investments, and buys them on behalf of the client if need be. These holdings are consolidated to give an overall perspective, and can be held alongside other holdings to give a complete portfolio view.

What do I get from my wrap account provider?

The wrap account provider sends investors an annual overview statement. At any point, the information can be updated. This allows investors to see how their money is allocated.

Which wrap account should I choose?

One aspect of the wrap accounts market is that there are very few. Depending on what you want, mutual fund wraps are usually the most simple. Other, more advanced wrap accounts exist, but these should be investigated before committing.

Which companies offer wrap accounts?

Several key providers dominate the wrap accounts market. These include Standard Life, Abbey, Selestia, Fidelity FundsNetwork, Skandia and others.

How do I get a wrap account?

Most wrap accounts are sold through intermediaries such as independent financial advisers. However, some are available direct.

How much do wrap accounts cost?

The fees for wrap accounts generally stand at around 2 per cent. Investment products are offered at wholesale cost, meaning cheaper prices.

Do investors in wrap accounts need a minimum amount of assets?

This depends entirely on the provider. Some assign managers to high-value accounts, others allow customers to manage their own portfolios. Wealthier investors are understood to gain the most from wrap accounts.

Can I transfer to a different wrap account?

Again, this depends on the provider. It can prove difficult, and closing a wrap can incur fees, depending on the holdings involved.

 

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