With our SSAS- Small Self Administered Pension Scheme and manage your own pension investments whilst we handle the administrative day to day chores.
pension practitioner is a SSAS administrator with expertise in
in pension administration, Employer Loans, SSAS Set Ups, Litigation, Pension Property.
Our pension practitioner establishes SSAS pension schemes for employers directors and key employees. So contact us for expert pension advice to ensure that you receive the full tax reliefs available to your scheme.
A. Introduction Pensions is a way of providing retirement income. Whilst a man works until he is 55 he, his employer and anyone else can contribute into his pension pot. B. Government Assistance The government helps you build your pension pot by giving you tax exempt status provided your pension is held in a vehicle that is separate from you. That is why we set up our pension schemes under trust. The money in the trust is separate from the individual. So once the money is in the pension trust any profits it makes is not subject to tax provided not more than £40,000 or if the member’s salary is below then whatever the member’s salary is capped at £40,000 each year. If a member contributes more than £40,000 to his pension scheme in one year he can do so but the balance is taxed. C. How Pension schemes pay you your pension. There are two way either: 1. Defined Benefit Pension scheme (also known as final salary scheme)- this is where the amount you receive on retirement is guaranteed subject to the number of years you work and your final salary on retirement. Here the responsibility is on the employer to keep making the required contributions and on the pension scheme trustees to invest the money wisely so that they can afford to pay you retirement income for life. If the scheme does not make enough money the employer’s covenant with the schemes means that he has to make up the shortfall provided he doesn’t go broke. 2. Defined Contribution Pension scheme (also known as Money purchase Pension scheme) - here you only get as a pension what is in the pot when you retire. D. Types of pension schemes 1. Personal Pensions / Private Pensions- money purchase/ defined contribution so what you put in is what you get. Here you normally arrange it yourself- you go to a pension company and set up what is a tax efficient savings plan to provide you income after retirement. 2. Stakeholder Pensions- almost always money purchase/ defined contribution so what you put in is what you get. Similar to personal pensions but with more government regulation restricting how much the pension provider can charge in management fees. 3. Self Invested Personal Pension (SIPP)- A SIPP is a pension plan that gives you the freedom and control to totally manage your own investment decisions by buying stocks and shares and a range of other types of asset. 4. State Pensions A State Pension, also know as a Government Pension or Old Age Pension, is a pension that is accumulated during an individual's lifetime and paid by the Government when they reach state pension age. A state pension value is based on the number of years of National Insurance (NI) contributions made throughout the person's working life. 5. Occupational pension scheme- this can provide retirement benefits on a money purchase or defined benefit (final salary) basis. Here the employer sets up with the aid of a pension administrator ad pension scheme by trust and appoints trustees usually its employees and maybe a professional trustees to manage the contributions on behalf of the members of the scheme- also employees. There are two types- normal type where there is no limit on the number of members the scheme has and a second type called the small self-administered scheme (SSAS) which has less than 12 members. If the scheme has less than 12 members and is called a SSAS it enjoys a lot of exemptions from the regulations governing pension schemes so can be cheaper to run. For example trustees of a SSAS don’t have to attain a certain level of trustee management knowledge before they can be trustees. Basically anyone over 18 can do the job. However to enjoy these exemptions it must be self administered- so those who run the scheme (the trustees must also be all the members. The government is not too bothered about protecting members if they are making all the pension investment decisions themselves. It is popular with small business owners who wish to set up a small pension scheme for just themselves or maybe one or two other employees. It is a SSAS that we set up and administer.
How a SSAS works
I act as third party pension administrator for SSAS pension schemes. By third party I mean that I will not be a trustee or member of the scheme. Typically only the member who wishes to save retirement savings will also be the trustee.
B. SSAS investments- basically a SSAS can invest in anything except: 1. Residential property- this is because the tax exempt status given to pension schemes is given provided the member doesn’t enjoy the benefits until he is 55 years old. If a SSAS pension scheme could invest in residential property there is nothing stopping the member then living in that property and therefore enjoying his retirement income before he is 55. Therefore only commercial property is suitable for a SSAS. 2. Tangible property- i.e assets that are moveable and not fixed such as paintings cars boats etc. again the reason is that these can be enjoyed by the member personally before he reaches 55. 3. They cannot lend more than 50% of the net value of the pension pot to the pension scheme employer. 4. They cannot spend more than 5% of the pension pot value in shares of the enployer. This is to prevent the scheme being too reliant n the sponsoring employer so that the scheme doesn’t go bankrupt when the employer company goes bust. It will only lose 5% of its worth. 5. They cannot lend or give money to any member or person connected to a member such as a family member. 6. They must invest not trade. E.g they should buy shares for say 6 months instead of for one month before selling and buying other and then doing the same. Likewise they cant own a shop selling goods as that would be trading.
C. How Pension Loans work. 1. Up to 50% of the net value of the pension scheme can be lent to the sponsoring employer of the scheme. That is the employer that sets up the scheme. it must be on a commercial lending basis and the government allows the scheme to charge interest at 5% payable annually for 5 years. if the loan is not repaid in 5 years the loan can be rolled over for another 5 years. so the maximum loan term is 10 years in reality. 2. The loan must be secured by a first charge over an asset of equal value to the loan amount and the interest over 5 years that will be paid. This security can be in most forms such as over shares, goodwill of a business or commercial land or a charge over the commercial lease to the employer’s business (I allow residential property provided it doesn’t have a mortgage on it). So if the loan is £10,000 and the interest payable in the 5 years is £1,548.74 then the security must be valued at £11,548.74 by an independent valuer. Usually an accountant for a fee of £3-500.00. 3. The security doesn’t have to be owned by the employer company. It can be owned by anyone. And we have a security provider who will charge 20% of the security amount needed to provide the security. So for third party security for £11,548.74 our security provider would charge £2309.74. 4. The rest of the other 50% of the pension pot can be invested normally in other investments like the stock market, company bonds etc. however if any investment is to be made in a company connected to the member or the employer then an independent valuation must be obtained. But if the investment involves shares in that company as opposed to bonds and other investments then How Pension Benefits are Paid after 55. Pension flexibilities were introduced on 6 April 2015. Before 6 April 2015, defined contribution (DC) pension pots after the 255 tax free lump sums could only be used to buy a lifetime annuity or a scheme pension which was basically your pension scheme not a third party annuity provider paying you small fractional amounts regularly designed to last until your expected death age. Since April 2015 you can basically take all you pension pot as a lump sum provided you pay tax at your marginal rate on 75% of your pot.
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