Small Self Administered Pension Schemes

Recondite49

Full rundown of these on Consumer Help website.

In essence this allows owners of corporations to administer their own Pension Scheme with the help of a Trustee company. The topic has appeared a couple of times on Boards but not recently:

Advantages include that you can choose what to invest in, from stocks and bonds to property (albeit not for personal use).

Income gleaned and capital gains are not subject to tax. As far as I can tell you can also withdraw a certain lump sum tax free from the age of 50 up to €200k.

This would seem to be an option for people who already have an established portfolio or pension fund as the fees charged by Trustees (who are approved by the Revenue) can be quite high.

What I am wondering is, I have registered my own web design company here in Ireland, can I set up a SSAP using this? Does anyone have experience of these?

Henry Ford III

If you're drawing salary your employment is pensionable. That means setting up a SSAP is indeed possible.

I've dealt with a few of them on behalf of a few clients. They vary in ability, and even technical knowledge.

All of them are pretty expensive though, and I reckon a SSAP is only suitable for a very hands on client, with sizeable funds and premiums to invest, and who is a savvy and active investor.

There are alternatives however at considerably reduced costs, which still allow direct investment control.

Recondite49

Henry Ford III wrote: »

If you're drawing salary your employment is pensionable. That means setting up a SSAP is indeed possible.

I've dealt with a few of them on behalf of a few clients. They vary in ability, and even technical knowledge.

All of them are pretty expensive though, and I reckon a SSAP is only suitable for a very hands on client, with sizeable funds and premiums to invest, and who is a savvy and active investor.

There are alternatives however at considerably reduced costs, which still allow direct investment control.

Thanks Henry, sounds promising. I suppose I was really attracted to the fact that it helps you avoid income tax and capital gains, still as you say it's quite elaborate and expensive ; perhaps it's better to pay up.

40701085

Henry Ford III wrote: »

If you're drawing salary your employment is pensionable. That means setting up a SSAP is indeed possible.

I've dealt with a few of them on behalf of a few clients. They vary in ability, and even technical knowledge.

All of them are pretty expensive though, and I reckon a SSAP is only suitable for a very hands on client, with sizeable funds and premiums to invest, and who is a savvy and active investor.

There are alternatives however at considerably reduced costs, which still allow direct investment control.

I was having a glance at these SSAPs too...
How are the fees charged by pensioneer trustees, typically? Maintenance % (like fund management fee) or transaction based? Combination of both?

I've seen alternatives mentioned like self-directed options with standard life, are these a better option if you're not loaded?

NewCorkLad

Recondite49 wrote: »

Thanks Henry, sounds promising. I suppose I was really attracted to the fact that it helps you avoid income tax and capital gains, still as you say it's quite elaborate and expensive ; perhaps it's better to pay up.

In my opinion SSAPs are only suitable when you are looking to purchase properties to manage within your pension portfolio. Unfortunately with credit having dried up you now have to fund the full property purchase yourself. The charges on managing this are very high which means you would need a property paying high rental returns to pay the charges never mind acheiving any growth, which means you would need a substantial pension to start with.

If you are looking at purchasing shares Standard Life & Irish Life have share purchasing arrangements within their Personal/Exec pensions that are easy to manage. The Personal Pension is not accessible until at least 60, but the Exec Pension can be accessed from 50, under certain circumstances, with the similar tax benefits to the SSAP.

Recondite49

NewCorkLad wrote: »

In my opinion SSAPs are only suitable when you are looking to purchase properties to manage within your pension portfolio. Unfortunately with credit having dried up you now have to fund the full property purchase yourself. The charges on managing this are very high which means you would need a property paying high rental returns to pay the charges never mind acheiving any growth, which means you would need a substantial pension to start with.

If you are looking at purchasing shares Standard Life & Irish Life have share purchasing arrangements within their Personal/Exec pensions that are easy to manage. The Personal Pension is not accessible until at least 60, but the Exec Pension can be accessed from 50, under certain circumstances, with the similar tax benefits to the SSAP.

Thanks chief, much appreciated. It seems to me if you're unable to live in the property or to use it for business purposes, there's very little advantage anyway. Back to drawing board methinks!

Liam D Ferguson

I have a self-administered pension for myself and I also arrange them for clients from time to time. Advantages in my view - control of investments, transparency. Disadvantages - charges don't suit smaller funds but start to look more attractive for larger funds. Unless you're actually going to invest the money, don't bother. This might sound obvious, but you'd be surprised how many people have set up SSAPs in the past with great intentions of buying this, that or the other investment and never got around to it because their own business was keeping them busy.

On the property side the advantage is that rental income goes into the pension fund with no income or other tax liability. Similarly dividend income from shares. No capital gains tax on sales of any assets (property or shares) at a profit.

That said, when you eventually come to retire, normal taxation rules on pension funds will apply - tax-free lump sum up to certain limits and the balance as your "pension" income, which will be taxable if you're in the tax net in retirement.

Recondite49

Liam D Ferguson wrote: »

I have a self-administered pension for myself and I also arrange them for clients from time to time. Advantages in my view - control of investments, transparency. Disadvantages - charges don't suit smaller funds but start to look more attractive for larger funds. Unless you're actually going to invest the money, don't bother. This might sound obvious, but you'd be surprised how many people have set up SSAPs in the past with great intentions of buying this, that or the other investment and never got around to it because their own business was keeping them busy.

On the property side the advantage is that rental income goes into the pension fund with no income or other tax liability. Similarly dividend income from shares. No capital gains tax on sales of any assets (property or shares) at a profit.

That said, when you eventually come to retire, normal taxation rules on pension funds will apply - tax-free lump sum up to certain limits and the balance as your "pension" income, which will be taxable if you're in the tax net in retirement.

Thanks so much for this Liam, it does sound a great way to offset capital gains and income tax. You mentioned before it's not worth your while for smaller funds, so what would you say the cut off point is?

I do know you can claim pensioncontributions against tax up to a certain percentage of your salary depending on your age and I'm nowhere near that number yet.

Liam D Ferguson

Annual charge would typically be €1,500+ so if your fund is €50,000 that's about 3% per year which is dear compared with a traditional insured scheme. But if your fund is >€100,000 it starts to look more appealing. Like everything else, there's competition among pensioneer trustees so they don't all charge the same.

A lot of people accumulate a fund over a period of time in a lower-charging plan and then transfer to a Self-Administered scheme when it's reached critical mass.

lucky john

NewCorkLad wrote: »

If you are looking at purchasing shares Standard Life & Irish Life have share purchasing arrangements within their Personal/Exec pensions that are easy to manage. The Personal Pension is not accessible until at least 60, but the Exec Pension can be accessed from 50, under certain circumstances, with the similar tax benefits to the SSAP.

Probably a silly question but I'll ask any way.
Is there a personal pension available that you can transfer shares you already own into or do all assets have to be purchased from with the pension?

Recondite49

Liam D Ferguson wrote: »

Annual charge would typically be €1,500+ so if your fund is €50,000 that's about 3% per year which is dear compared with a traditional insured scheme. But if your fund is >€100,000 it starts to look more appealing. Like everything else, there's competition among pensioneer trustees so they don't all charge the same.

A lot of people accumulate a fund over a period of time in a lower-charging plan and then transfer to a Self-Administered scheme when it's reached critical mass.

Hi Liam,

That sounds like a good plan, best stick to the company pension plan at present. Also there's the fact many corporate employers will match your contributions up to a certain level.

Also I imagine capital gains tax only becomes an issue when you have to actually sell off your shares, so you can at least defer the costs.

Liam D Ferguson

lucky john wrote: »

Probably a silly question but I'll ask any way.
Is there a personal pension available that you can transfer shares you already own into or do all assets have to be purchased from with the pension?

You can't transfer shares directly into a pension fund. You can sell the shares and then use the proceeds to make a contribution to the pension and then buy back the same shares.

lucky john

Liam D Ferguson wrote: »

You can't transfer shares directly into a pension fund. You can sell the shares and then use the proceeds to make a contribution to the pension and then buy back the same shares.

Thanks Liam.

I had a feeling it might not be a straight fordward transfer. I save money in shares rather than deposit accounts and for the longterm so its a tax efficient option. I have a pension I took out years ago without educating myself as too charges. Big mistake. I have more or less parked it and looked at other ways of planning for the future. This thread has sparked my interest for sure.

Is there any particular site where the regulations as regards self administered personal pensions is available?

Liam D Ferguson

lucky john wrote: »

Is there any particular site where the regulations as regards self administered personal pensions is available?

There's some basic information here and some more detailed information from the Revenue pensions manual here.

40701085

Is there something about the pensioneer trustees not being under the regulation of the central bank? Thought I read something like this under one of their websites.
In practical terms I'm wondering how much the risk ramps up because of this, if it's true?

Liam D Ferguson

40701085 wrote: »

Is there something about the pensioneer trustees not being under the regulation of the central bank? Thought I read something like this under one of their websites.
In practical terms I'm wondering how much the risk ramps up because of this, if it's true?

That's true - a pensioneer trustee is authorised as such by Revenue and not the Central Bank. That said, the pensioneer trustee is only involved with the pension structure. If you want advice on the investment of monies withn the pension structure, then you'll still need an investment advisor and (with the exception of direct property) the investment advisor will need to be authorised by the Central Bank.

lucky john

Liam D Ferguson wrote: »

There's some basic information here and some more detailed information from the Revenue pensions manual here.

A belated thanks for that Liam.

terencemc

Just wondering if yee guys know of any banks willing to lend for self administered pensions at the minute...If so what type of LTV ratio is needed?

Cheers

The J Stands for Jay

Recondite49 wrote: »

Thanks Henry, sounds promising. I suppose I was really attracted to the fact that it helps you avoid income tax and capital gains, still as you say it's quite elaborate and expensive ; perhaps it's better to pay up.

This isn't exclusive to SSASs; all Revenue approved pension schemes grow tax free.

TutuKaka

Hi,

Is this an option post-retirement with funds that are currently invested in an ARF?
I know that technically borrowing is allowed to invest directly in property but the reality is that no banks are providing any funding. Can you top up the investment amount with funds that are not held in the Arf?

The J Stands for Jay

TutuKaka wrote: »

Hi,

Is this an option post-retirement with funds that are currently invested in an ARF?
I know that technically borrowing is allowed to invest directly in property but the reality is that no banks are providing any funding. Can you top up the investment amount with funds that are not held in the Arf?

The only money that can be paid into an ARF is money from a pension. Of course you could just put the money into a PRSA and immediately transfer it into the ARF, but you would need to make sure you have income against which you can claim tax relief to make it worthwhile.

Edit: This is assuming you're over 60 years old to be able to immediately transfer out of the PRSA.

TutuKaka

Thanks for that.
The person is over 60 and his PRSA is now a vested Arf.
He still has an income.
Can he still make payments into the Arf?

If not:
if he is looking at a property for €100,000 and his Arf funds are €90,000, can he use other savings to finance the €10,000?