Self Administered Pension

sartay

Hi all, just wondering if anyone knows much about SSAPs? My father has his own company and has an executive pension scheme. He's recently been looking at buying a property through a pension and is looking into setting up a SSAP. However he's been told by the crowd that he approached to set up the SSAP that he would have to close down his existing pension and transfer the funds into the new SSAP. He was told that he can't have two executive pensions running at the same time. But he can't find information on this anywhere else and isn't sure that it is correct. He'd really rather leave his existing pension as it is.

If anyone has any info, it would be much appreciated.

titular

I'm a bit rusty on this but there is some truth in what is being said. Your father could not have two pensions running concurrently unless he has two seperate companies (or some other seperate source of non-pensionable income). That said, he does not need to transfer the existing pension into the SSAP - he can simply make the existing pension paid up and open a SSAP.

There may be funding reasons as to why he may need a certain level of funding in the SSAP before a property purchase is considered but there is no regulatory requirement.

He may wish to have a look at a self directed pension as an alternative - they have the same flexibility but are free of a lot of the trustee requirements and costs of SSAP's - Standard Life and Irish Life both have the option for property purchase in this regard.

eagle_i

Unless your father or his company are in the position to put up the full purchase cost of the property through the SSAP, yes he will need to transfer the funds from his Executive Pension Plan (EPP). If he is in the position of purchasing the property through the SSAP without the funds from the EPP, he can make the EPP paid up and leave the funds invested in that plan. You do not state why he wishes to keep the EPP, I can only assume his fund was affected by the downturn and he’d rather not take a hit on the fund by transferring it. If this is the case, as I said he does not have to take the hit and can leave it invested in the EPP, once the value has recovered he can then decide to transfer it to the SSAP. Alternatively, the monies in the EPP can be brought into the SSAP, but remain invested in the EPP fund(s), ie. the monies do not have to move out of the current fund(s) therefore he does not take the hit.

Has your father looked at the Self Direct pension plans with Irish Life and Standard Life? As such these are like SSAP’s but without the expense of Pensioner Trustees, annual Audits etc.. The self directed plans will allow you to purchase a property into your fund in much the same way as an SSAP. Self Directed plans also allow borrowing within them, my understanding of the Standard Life plan they have a borrowing arrangement with a lender (or certainly they used to), the effective borrowing is done by Standard Life on your behalf, it is taken in on their books and allocated as your personal property fund. Obviously the property and the tenant must meet Standard Life’s terms, the rent roll along with your father’s contributions must be able to make repayments on any borrowing. Also, the property itself needs to be an ‘Arms Length’ purchase, in other words your father or his company must have no personal/professional connection with the property and its tenant, otherwise the revenue will not permit the purchase. Your father needs good advice on this from both the SSAP and the Self Directed avenues. These are complicated areas so make sure the adviser(s) is(are) competent in these areas. Also if your father is looking to do a quick turn on the property, say he was to purchase it and sell it on within the next 2/3 years (yes, in the eyes of the revenue 2 or 3 years is a quick turn!), it could be deemed as trading which is not allowed. Stupid, I know, considering you can buy and sell shares without time limit restrictions – I think you can call that trading too!!

johnc2212

the fees for SSAPs are not as expensive as being made out here and are negotiable depending on which trustee you use.

Self directed is an insured contract so assets sit on the balance sheet of the insurance company, whereas they sit in a separate legal trust with a SAPS, i.e. there is potentially greater protection of assets within a SAPS, as if the Trustee company failed for example the assets of each and every SAPS would be completely protected.

SAPS typically have a greater level of investment powers, the trust deed will normally allow for any sort of investment once it does not contravene Revenue rules, a lot of self directed products are in some shape or form limited in what can be invested in.

Typically the fees on a SAPS are lower than those of a self directed and unlike self directed fees can be paid for by the sponsoring employer ( the director's company) and as mentioned fees can be negotiated.