Small Self-Administered Schemes (SSAS)

Transcription

1 Small Self-Administered Schemes (SSAS) listening, understanding, advising

2 1 Introduction A small self-administered scheme (SSAS) is an occupational registered pension scheme that can help meet the needs of business owners who wish to set up a pension arrangement for a small group of co-directors and key employees. A SSAS offers our corporate clients a wide range of potential investments including stocks and shares, unit trusts, investment trusts, OEICs, deposit accounts, loan backs and commercial property providing greater flexibility and investment control over their pension arrangements. A SSAS is classified by HM Revenue & Customs as a Registered Pension Scheme, therefore under current legislation SSAS will enjoy considerable tax benefits including: n Company contributions normally qualify for corporation tax relief in the year they are made n Contributions by members are free from income tax n Investments (other than dividend income) growth is free from income tax and capital gains tax n A pension commencement lump sum can be taken from age 55 free of tax n Lump sum death benefits can be paid free from inheritance tax

3 2 The Old Mill SSAS Old Mill Pensions Consultancy has run the administration and accounts for pension schemes since the early 1980 s. Through our years of experience we are able to offer our pension scheme clients technical advice, investment advice as well as a highly efficient and personal service and are perfectly positioned to act for Small Self-Administered Schemes (SSAS) on behalf of the Trustees. How we work All registered pension schemes must have at least one scheme administrator, a highly responsible and time consuming role. The scheme administrator is responsible for fulfilling many important functions including; n Registering the pension scheme with HMRC n Reporting events relating to the scheme to HMRC n Making returns to HMRC n Providing information to scheme members Old Mill Pension Consultancy (OMPC) does all this for you and more. By simply appointing us as a scheme practitioner we can act on your behalf and look after the administration of your SSAS. Our services include: n Acquisition and administration of property n Investment management n Provision of all technical support n Preparation and presenting annual pension fund accounts n Attendance at Annual Trustee Meetings n Calculating and arranging payment of benefits n Provision of documentation Scheme Accounts Scheme accounts should be prepared annually. Old Mill will produce a full set of accounts each year up to 5 April year to coincide with HMRC s reporting requirements, as part of our ongoing service. The accounts do not need to be audited provided all members are trustees and trustee decisions are made unanimously. Old Mill is independent of all banks and financial institutions and employs some of the most highly qualified financial specialists in the country. Our strength lies in our integrated service of accountants, financial planners and pension managers, advising on areas such as investment strategy, tax, retirement options and protection planning.

4 3 Funding your SSAS Employer and Member Contributions The employer and the members may contribute to the SSAS and receive tax relief up to a maximum level known as the annual allowance. The annual allowance for the 2011/2012 to 2015/2016 tax years is 50,000 per annum. Tax relief on contributions in excess of the annual allowance can be obtained by utilising any unused annual allowance from the previous three qualifying tax years, providing the individual was a member of a registered pension scheme. This facility is called carry-forward. For further guidance, please ask for a copy of our carry-forward guidance notes. Employer contributions will receive tax relief in the year they are made, provided they are wholly and exclusively for the purposes of the employer s trade. However, special rates may apply regarding the spreading of tax relief if a contribution exceeds 500,000. Members can also contribute to the SSAS up to age 75 and receive tax relief up to 100% of the member s earnings in any tax year (Subject to 50,000 maximum). In Specie Contributions In specie contributions can also be made to a SSAS. These involve the transfer of the legal ownership of an asset (other than cash) from a company or an individual to a pension scheme, without the need for a sale and repurchase. The value of the asset at the point of transfer is treated as the amount of pension contribution on which tax relief is claimed. Transfers Members may have benefits in other pension arrangements which can be transferred into the SSAS. This includes plans where benefits are being paid (income drawdown). Any transfer payments will increase that member s share of the SSAS to enhance their potential pension benefits. Potential advantages: n Control n Reduce costs n Increase borrowing capacity, property purchase power and loan backs, (see investments). A SSAS can also receive pension transfers by way of an in-specie payment. i.e. in their existing form, without having to surrender the investments before transferring them. In specie transfer of assets can be a complex process involving several different parties and will usually take longer than cash transfers. A SSAS is an ideal vehicle to consolidate existing pension arrangements. Our pension experts can help you to determine the most suitable assets to place into your SSAS. Investments One of the main features of a SSAS is that the members have full control over the investment of their funds. Old Mill can give guidance and advise members as to the most appropriate options. The main types of investment include; n Bank and Building Society deposits n Quoted equities on the London Stock Exchange

5 4 n Quoted equities on recognised worldwide stock exchanges n Unit Trusts and Open Ended Investment Companies n Commercial property and land n Secured loans to the principal or participating employer n Gilts, Bonds and Fixed Interest Stocks n Shares in the principal employer n Offshore managed funds n Futures and options n Insurance company managed and unit linked funds n Hedge funds Loans The SSAS fund can be used to inject cash into the member s business and up to 50% of the net assets of the SSAS can be lent to the establishing or any participating employer and secured against assets of equivalent value. Loans can also be made to third parties but cannot be made to members or their families. For further information please ask for a copy of our SSAS Loan Guidance Notes. Property Using a SSAS can be an extremely attractive and tax efficient way of purchasing commercial property from either a third party, a member or from a sponsoring or associated employer injecting cash into the business. Once the property is an asset of the scheme, it can be leased back to the business at a commercial rent or to a third party. For further information please ask for a copy of our Self Invested Property Guide. Borrowing The scheme can borrow up to 50% of its net assets. Borrowed funds can be used for investment, or to help finance property purchases or other commitments such as the payment of pension or death benefits. Shares Investment in listed or unlisted shares including sponsoring employers is possible. The amount invested in any one sponsoring employer is limited to 5% of the net assets of the scheme and 20% of the net assets of the scheme where shareholdings relate to more than one sponsoring employer. Prohibited investments: n Residential property that does not meet the residential property exemptions n Loans to member trustees n Property investments in Limited Liability Partnerships n Antiques n Fine Wines n Works of Art n Vintage cars n Yachts n Jewellery and gem stones n Rare books and stamps We use our robust investment process to build a sound financial strategy. Crucially, this is based upon a thorough understanding of what members wish to retire on. We are in this with you for the long term and understand the importance of guiding you through the different financial stages of your life. An Old Mill Financial Planner will work with members to ensure that you have the right investments to meet your retirement goals.

6 5 Lifetime Allowance The lifetime allowance is the maximum pension fund that an individual can accumulate from all of the pension schemes of which they are a member during their lifetime, without being subject to a tax charge, known as the lifetime allowance charge. A member s fund is tested against the lifetime allowance when they take benefits and at age 75 if benefits have not been taken. The lifetime allowance for the tax years from 2012/2013 until 2015/2016 will be 1,500,000 when the Government will review the limit. It is possible to accrue pension benefits above 1,500,000 and not incur a lifetime allowance charge if the member has registered for primary protection, enhanced protection or fixed protection. Benefits on Death If a member dies the individual s funds can be paid out either as a lump sum and/or a dependant s pension. Up to age 75 if a member is not drawing on their fund then the lump sum is tax free within the Lifetime Allowance. If the member has started to draw benefits or is over 75 a 55% tax charge applies to lump sum death benefits. A dependents pension can only be paid to a spouse, civil partner or someone who is financially dependent on the deceased member. If the member has no dependents there is also an option to pay the fund tax-free to a charity nominated by the member. In normal circumstances there will be no inheritance tax liability on such payments regardless of when death occurs, provided they are paid at the Trustees discretion.

7 6 Taking the benefits from a SSAS These days no-one has a job for life. People work for longer and often adopt more flexible working practices, maybe working part time or in a consultancy capacity. A SSAS and the way you derive an income from it, should reflect these changing circumstances. A SSAS gives you this flexibility as it allows you to begin withdrawing money from the age of 55. A member can draw from a SSAS in stages, which allows them to draw on only a part of your fund and leave the rest untouched for the future. Pension Commencement Lump Sum The maximum tax-free lump sum that can be taken is 25% of an individual s fund up to the Lifetime Allowance. In some circumstances individual members may be entitled to more than this amount if lump sum protection has been obtained. Income Options A SSAS offers the widest choice of options available when taking pension benefits. The pension can be secured by an annuity purchase or scheme pension or the pension can be paid from the SSAS through either capped drawdown or flexible drawdown. Any pension taken will be treated as earned income and is therefore liable to income tax. Annuity Purchase An annuity arrangement is where your share of the fund, less any pension commencement lump sum, is paid to an insurance company which will then provide a set level of income for the remainder of the your life. Capped Drawdown The amount of pension that can be taken via capped drawdown can vary each year between 0% and 100% of the amount of annuity that could be provided using the Government Actuary s Department s annuity rate applicable for the member. The maximum level of capped drawdown must be reviewed at least every three years and annually after age 75. Capped Drawdown allows the Trustees to retain control of the assets. Flexible Drawdown Individuals that meet the Minimum Income Requirement (MIR) of at least 20,000 per annum will be able to drawdown an unlimited amount from their pension fund each year. Having entered Flexible Drawdown there will be no restrictions on the income the individual can draw. Flexible Drawdown allows the Trustees to retain control of the assets. The income included for satisfying the MIR must be guaranteed and payable for life. The income that will count towards the MIR includes the basic state pension, additional state pension, lifetime annuity income and scheme pensions from a defined benefit scheme. Scheme Pension Instead of purchasing an annuity with an insurance company or selecting Capped or Flexible drawdown, a member may elect for a Scheme Pension. This pension will be determined at outset and may not be varied other than in extreme circumstances. The Trustees retain control of the assets backing the Scheme Pension (and a dependant s pension) until death. The level of scheme pension is calculated by an actuary and will take into account the age, fund value, investment portfolio and a member s health and in certain circumstances can provide a higher income.

8 Contact Old Mill If you would like to discuss anything in this brochure please contact us. Our cost of the initial consultation is borne by Old Mill and without obligation. Dorchester The Old Rectory, South Walks Road, Dorchester, Dorset DT1 1DT Tel: Fax: Exeter Leeward House, Fitzroy Road, Exeter Business Park, Exeter, Devon EX1 3LJ Tel: Fax: Shepton Mallet The Old Mill, Park Road, Shepton Mallet, Somerset BA4 5BS Tel: Fax: Yeovil Number One Goldcroft, Yeovil, Somerset BA21 4DX Tel: Fax: Melksham Challeymead Business Park, Melksham, Wiltshire, SN12 8BU Tel: Fax: Please take a moment to read this important information The views and opinions contained in this document are those of Old Mill Financial Planning LLP at the time of going to print and the content is for general information only. It should not be relied upon without taking appropriate professional advice which will be tailored to your individual circumstances. Please contact your usual Old Mill representative or local Old Mill office. Old Mill Financial Planning LLP is an Independent Financial Adviser and is authorised and regulated by the Financial Services Authority. Registered in England No. OC The registered office for these companies is The Old Mill, Park Road, Shepton Mallet, Somerset BA4 5BS.