MANAGING THE SCHEME INVESTING THE SCHEME FUNDS REPORTING TO HM REVENUE & CUSTOMS REPORTING TO THE PENSIONS REGULATOR CONTRIBUTING TO THE SCHEME

Transcription

1 MANAGING YOUR SSAS This material is for use by UK financial advisers and trustees of the scheme only. It is not intended for onward transmission to private customers and should not be relied upon by any other person

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3 SECTION 1 MANAGING THE SCHEME SECTION 2 INVESTING THE SCHEME FUNDS SECTION 3 REPORTING TO HM REVENUE & CUSTOMS SECTION 3A REPORTING TO THE PENSIONS REGULATOR SECTION 4 CONTRIBUTING TO THE SCHEME SECTION 5 PROVIDING ADMINISTRATION DATA SECTION 6 PROCEDURES FOR MEMBER CHANGES SECTION 7 CHANGING THE SCHEME 1

4 THIS GUIDE HAS BEEN PREPARED BY SCOTTISH WIDOWS FOR THE USE OF MANAGING TRUSTEES AND THEIR FINANCIAL ADVISERS. IT SHOULD BE USED AS A REFERENCE POINT FOR BOTH LEGISLATIVE AND ADMINISTRATIVE ISSUES PERTAINING TO THE SSAS. We hope that the contents will help the Managing Trustees to carry out their obligations under the scheme rules. Ultimately the Managing Trustees are responsible for the effective running of the SSAS. Our Guide outlines the areas where specific action must be taken, to avoid possible tax charges being imposed on the Managing Trustees. Tax legislation provides for possible tax charges and even de-registration on: Payment of benefits which are deemed as unauthorised by HM Revenue & Customs (HMRC); and Use of the scheme for tax avoidance. The effects of de-registration are severe, and include a tax charge on the Scheme Administrator 40% of the value of the scheme s assets. The Guide is based on Scottish Widows understanding of the relevant law and current HMRC practice. It is intended to convey only the basic requirements of these, and we cannot accept legal responsibility for the consequences of any possible omissions. The Managing Trustees should always obtain professional advice, where appropriate. Issued by: Scottish Widows Limited, SSAS Team PO Box 918, 15 Dalkeith Road Edinburgh EH16 5XA 2

5 SECTION 1: MANAGING THE SCHEME MAKING DECISIONS The Scheme is administered by the Managing Trustees who are also the members. Where the scheme has only one member, a non-member Managing Trustee must also be appointed. As the Managing Trustees are also the directors of the sponsoring or any participating employer ( the company ), the interests of the members must take priority when any decisions are made. To achieve this, there must be a clear separation of your trusteeship and any directorship responsibilities. In particular, the Managing Trustees should: 1. Consider taking independent professional advice before proceeding with or disposing of any investment. 2. Ensure that every investment and procedural decision is agreed in writing by all the Managing Trustees. This will normally be sufficient to ensure exemption from most of the requirements of the Pensions Act 2004 and statutory self investment limitations. It is the Managing Trustees responsibility to maintain these exemptions. Decisions and agreements should always be fully minuted. BANK ACCOUNT All monetary transactions by the scheme must be paid into or out of the scheme bank account of which Scottish Widows Trustees Limited (SWTL) is a co-signatory e.g. all contributions and investment income to the scheme rental income proceeds from the sale or disposal of assets owned by the scheme cash repayments of loans other money transfers into the scheme. It is also permissible for payments to life office pension policies and unit and investment trusts to be invested directly by direct debit or standing order on the company s bank account. SWTL should be informed where this method is preferred. 3

6 SECTION 1: MANAGING THE SCHEME THE MANAGING TRUSTEES SHOULD CONSULT THE SCHEME RULES TO ESTABLISH: Arrangements for the conduct of trustee business Arrangements for the appointment and removal of trustees Authority to appoint a scheme secretary and other powers of delegation The restrictions on investment powers The company s responsibility for scheme expenses The extent to which the Managing Trustees may be indemnified against breaches of trust The duties of SWTL as Special Trustee. WHAT DOCUMENTS SHOULD BE IN THE MANAGING TRUSTEES POSSESSION? The scheme documents should be readily accessible. We strongly recommend they be kept separately from company records. The items listed below should be retained permanently. All trust deeds and rules Literature issued to members Resolutions and minutes concerning all investment and procedural decisions Appointments of advisers Agreements with managers and other advisers Scottish Widows and other life office pension policies Unit trust and managed funds advice notes, share certificates Property title deeds and leases Loan Agreements Reports to HM Revenue & Customs and tax returns Security agreement under Data Protection Act 1998 Scheme accounts and audit statements Bank statements Contributions paid to the scheme (including those invested in Scottish Widows pension policies) since the date of the latest scheme accounts Investment income received since the date of the latest scheme accounts Details of transfers to and from scheme Benefits becoming payable to members on retirement, leaving service, death, divorce. SUGGESTED FURTHER POINTS FOR CONSIDERATION Who actually maintains the scheme documents and is responsible for their security? What is the preferred frequency of general trustee meetings? An annual review is recommended. A Special Trustee representative from Scottish Widows is available to attend annual trustee meetings to provide technical guidance and assist with matters arising. Who is responsible for calling trustee meetings? 4

7 SECTION 1: MANAGING THE SCHEME MINUTING TRUSTEE MEETINGS The Managing Trustees should keep written and approved records of all trustee meetings, showing the date, time and place of the meeting names of the trustees invited names of the trustees and all others (e.g. advisers) who attended decisions reached decisions made since the previous meeting. DEATH BENEFITS All members should complete an expression of wish form nominating the person they wish to receive any death benefit. Any such nominations should be periodically reviewed. The Managing Trustees should consider and take advice on the effects on the liquidity of the scheme upon death of a member e.g. if a loan is granted to the company, by the scheme or if a substantial proportion of the scheme assets is held in property. On the death of a member, the loan may have to be repaid or the property sold, to provide sufficient funds to pay the death benefit. This risk could be covered by a policy effected by the company outside the terms of the scheme. 5

8 SECTION 2: INVESTING THE SCHEME FUNDS This section summarises the basic investment options and limitations. It describes Scottish Widows understanding of the relevant regulations and current HMRC practice, and is intended only as a general guide as to what may be permissible. INVESTMENTS Current pensions legislation provides scheme trustees with many choices for the investment of their scheme s assets. There are still restrictions on some types of investment and there can be very serious tax consequences where these restrictions are infringed. PERMITTED INVESTMENTS The scheme can invest in a wide range of investments, including: UK and overseas equities (whether or not listed on a stock exchange) Corporate and government bonds Unit trusts and Open Ended Investment Companies (OEICS) Investment trusts Insurance Company managed and unit-linked funds and life policies Bank and building society accounts Investment grade gold bullion UK Commercial Property and Land. PROHIBITED ASSETS Legislation prohibits the scheme from investing in certain assets. These are defined as residential property and tangible moveable assets (such as fine wine, classic cars and works of art). Not only would the income and gains from investments of this nature not be eligible for tax relief, HMRC would also be able to impose very heavy tax penalties. CONNECTED TRANSACTIONS There is nothing to prevent the scheme undertaking an investment transaction with the employer, a member of the scheme or a person or company connected with either. However, any transaction of that nature must take place on an arm s length basis. If it doesn t, then any transfer of value from or to the scheme will be taxed at 40% as an unauthorised payment. The scheme may invest in shares of the sponsoring employer there are limits on this however. No more than 5% of the scheme s net assets may be invested in the shares of any one sponsoring employer. Where there is more than one sponsoring employer, no more than 20% of the net assets may be invested in their shares in total (the 5% restriction still applies in relation to each individual employer). Important Note: It is the responsibility of the Managing Trustees as Scheme Administrator to ensure that there is no investment by the scheme in any prohibited assets. Scottish Widows will not be held liable for any tax charges which arise as a result of such an investment. LOANS The scheme may make loans provided that they are secure and on commercial terms. The Trustees must consider whether the loan is a prudent investment. A loan made to a scheme member will be treated as an unauthorised payment. There will be an unauthorised payment charge levied on the member and a scheme sanction charge levied on the scheme. The scheme can make loans to the sponsoring employer, these are subject to particular restrictions. The loan must always be secured by a first charge on an asset of at least equal value. The rate of interest charged on the loan must be at least 1% more than the average base lending rate charged by the six largest high street banks (rounded up to the nearest multiple of 0.25%). The loan must be repaid over a period of no more than 5 years. 6

9 SECTION 2: INVESTING THE SCHEME FUNDS At the time the loan is made it may not be of an amount more than 50% of the value of the scheme s net assets. The loan must be repaid in equal instalments of capital and interest over each complete year of its term. Where any condition is not met, an unauthorised payment charge will be levied on the amount of the loan (or the part of the loan that doesn t comply). Loans made before 6 April 2006 will not be subject to these rules after that date provided that there is no change in the terms of the loan. Any loan of this type will however need to be taken into account when calculating ( testing ) the amount which the scheme is allowed to lend. BORROWING The scheme may borrow money, for example to enable it to purchase an investment. The borrowing must be undertaken on commercial terms any borrowing that is not will be subject to a tax charge. When a loan is taken out, it must not take the total of the scheme s borrowing to an amount that is more than 50% of the net value of the Scheme assets. Any borrowing in excess of 50% of the net value of the scheme assets will be subject to a scheme sanction charge of 40%. Borrowing in place before 6 April 2006 will not be re-tested after that date. It will however be taken into account in testing any further borrowing. CONTACT WITH THE SPECIAL TRUSTEE SWTL will be a co-signatory on the scheme bank account/s. SWTL will not provide investment advice or participate in Managing Trustees investment decisions, and will therefore have no opinion on the suitability of any individual scheme investment. However, before co-signing any scheme cheques, consideration will be given by SWTL on whether or not the intended transaction is barred by statutory regulations or the scheme rules. All investment criteria and decisions are for the Managing Trustees to resolve, having taken appropriate professional advice. Cheques drawn on the scheme bank account for the purchase of an asset must be signed on behalf of the Managing Trustees before being sent to Scottish Widows for signature by SWTL. These must be accompanied by the appropriate supporting documents, whether or not you wish SWTL to forward these on, with the cheque, on your behalf. Scottish Widows will aim to provide a by return service providing full and correct documentation is supplied with the cheque. Where a transaction must be completed by a certain date, the Managing Trustees must allow adequate time to allow Scottish Widows to complete their signing requirements. VALUE SHIFTING There can be situations where it is possible to pass value from or to the scheme without actually making a payment. This could happen, for example, where the terms of a lease are varied or where the rights attached to shares are altered. If this results in a transfer of value to or from a member or to or from the employer then an unauthorised payments charge will be levied on the amount of the transfer and a scheme sanction charge will be applied on the scheme. However, if the value shifting takes place on an arm s length basis on normal commercial terms, no charges will be made. 7

10 SECTION 3: REPORTING TO HM REVENUE & CUSTOMS EVENT REPORTING AND REGISTERED PENSION SCHEME RETURN Scottish Widows will provide assistance in the completion and filing of the following: Event Report if certain events occur, the Scheme Administrator is required to file an Event Report for that tax year. Registered Pension Scheme Return this return is only required if HM Revenue & Customs issue a notice to the Scheme Administrator. Both the report and return, if required, must be filed after the tax year has finished but before the following 31 January. Where the scheme is wound up, the report and return must be filed within 3 months of the winding up date, if that is earlier. The report and return must be filed online. HM Revenue & Customs will provide free software which can be used, however, third party software is also available, at a cost. ACCOUNTING FOR TAX RETURN If any income tax is due, the Scheme Administrator is responsible for completing an Accounting for Tax Return. Each return covers a three month period ending on 31 March, 30 June, 30 September and 31 December no return is required if there was no tax charged in the period. The return must be completed within 45 days of the end of the 3 month period. The return will have to be completed online at INCOME TAX Income tax must be paid within the same 45 day period as for the completion of the Accounting for Tax Return. The Managing Trustees will not receive an assessment or request for payment from HMRC. As with the Accounting for Tax Return, payments of Income Tax will have to be made electronically. FURTHER INFORMATION You can find more information about reporting to HM Revenue & Customs at Tax rules can change. SECTION 3A: REPORTING TO THE PENSIONS REGULATOR Scottish Widows will provide assistance in the completion and filing of The Pensions Regulator Scheme Return (only required if The Pensions Regulator issues a notice to the Scheme Administrator). This return must be filed online. 8

11 SECTION 4: CONTRIBUTING TO THE SCHEME CONTRIBUTIONS Contributions made to the scheme are allowable as a business expense as long as they are paid wholly and exclusively for the purposes of the trade or profession of the company. They can therefore be set against taxable profits for Corporation Tax or Schedule D tax relief purposes. Tax relief will normally be granted in the year of payment, at the highest rate payable by the company. Contributions will only be allowed for tax relief in the employer s accounting period in which they are paid. An exception to this will apply where an employer has made a very large non regular contribution in a particular accounting period. An employer contribution in a chargeable period will be deemed a very large non regular contribution where: It is more than 210% of the contribution paid in the previous chargeable period, and The amount of excess (defined as the amount paid over and above 110% of the contribution in the previous chargeable period) is 500,000 or more, and The reason for the increased contribution is not either to fund a cost of living increase for pensioner members, or to fund or meet a future service liability for new entrants to a scheme. In these circumstances tax relief will be spread in accordance with the following table: Size of single payments Number of years 500,000 to 999, ,000,000 to 1,999,999 3 over 2,000,000 4 In cases where trading conditions force the possibility of a company contribution holiday, the Scheme Administrator must notify Scottish Widows at the earliest opportunity. ANNUAL ALLOWANCE The Treasury sets an annual allowance on the amount that can be paid into each member s registered pension schemes without incurring a tax charge. Higher earners will have a lower annual allowance limit, called the tapered annual allowance. It applies to all contributions a member pays (or that are paid on their behalf) to all registered pension schemes they are a member of (except for transfers and contracted-out payments and pension credits following a divorce or dissolution of a civil partnership). In certain circumstances, the member may be able to take advantage of up to three years previous unused allowances. If the total contribution to all a member s registered pension schemes is more than the annual allowance, they will incur a tax charge at their highest rate of income tax. The Money Purchase Annual Allowance (MPAA) is currently 4,000. The MPAA applies to a member if they have flexibly accessed their pensions from us or any other provider and have received any of the payments listed below from 6 April 2015 onwards: a payment from a flexible access drawdown fund (also known as a flexi-access drawdown fund); a payment from a capped drawdown fund which would exceed existing capped drawdown limits; a pension encashment (also known as an uncrystallised funds pension lump sum); a payment under a flexible annuity contract; a pension payment from a money purchase scheme which has fewer than 11 other pensioner members; a stand-alone lump sum from a money purchase arrangement where the member was entitled to primary protection with a right to take a lump sum of greater than 375,000. The MPAA applies to all contributions a member pays (or that are paid on their behalf e.g. employer contributions and death-in-service premiums) each year to all money purchase pension schemes of which they are a member. If the MPAA applies to a member and their contributions exceed it, they will be liable to pay a tax charge based on their highest rate of income tax. The MPAA does not apply if the member has taken only income from a capped drawdown plan; tax-free cash (pension commencement lump sums) when using a plan to purchase an annuity or drawdown plan; or small pots taken as a cash lump sum. In these circumstances, the higher annual allowance applies. 9

12 SECTION 5: PROVIDING ADMINISTRATION DATA YEARLY ACTION Towards the end of each scheme year Scottish Widows will issue an Annual Declaration to the Managing Trustees for completion. This will be accompanied by an invoice for the technical services fee for the coming year, where applicable. The Declaration should be returned to Scottish Widows, with copies of the scheme bank account statements for the twelve months to the scheme year end, within six weeks of the scheme year end date. Payment of the technical services fee to Scottish Widows should be settled not later than the due date on the invoice. Scheme accounts should be produced at the end of each scheme year. A copy of the final accounts should be sent to Scottish Widows within six months of the scheme year end date. A Special Trustee representative from Scottish Widows is available, for an annual visit to the Managing Trustees to review the scheme and discuss any matters arising. ACTION FOR NEW MEMBERS New members can join at any preferred time. Membership is normally limited to Controlling Directors and their spouses/ registered civil partners, if employed by the company. The Managing Trustees should contact Scottish Widows if it is proposed that any other employee is to join. The Managing Trustees should ensure that any new member receives a Member s Booklet within one month of the joining date. ALLOCATION OF CONTRIBUTIONS Where the scheme has two or more active members, the Managing Trustees should maintain a record of the split between the members of any pension contributions paid. All such decisions should be minuted. The company may provisionally decide at commencement of the scheme to allocate contributions in fixed proportions. Where a special contribution is to be paid the Managing Trustee may prefer to make the allocation at the time of payment. Scottish Widows should be informed of any specific requirements agreed. 10

13 SECTION 6: PROCEDURES FOR MEMBER CHANGES Outline procedure for members who: Retire Leave service Leave the scheme while remaining in service Divorce/dissolve a registered civil partnership Die. 1. The Managing Trustees must decide and inform Scottish Widows of the following: If the scheme has more than one member, the proportion of the fund to be allocated to the member. The relevant date. The total market value at that date, of the scheme assets allocated. 4. The Managing Trustees need to decide how and where the benefits are to be secured. 5. Where necessary, the Managing Trustees should realise the member s share of the uninsured element of the scheme as cash. 6. The member s total fund is applied to secure benefits. For death claims the Managing Trustees must decide the distribution of the fund between the categories of beneficiaries as defined in the scheme rules. The member will remain a Managing Trustee until their benefits have been secured outwith the scheme, unless the member has died. 2. Scottish Widows will calculate the benefits and provide a draft Managing Trustee resolution. 3. The Managing Trustees should formally approve the calculated benefit by completing the resolution and returning a copy to Scottish Widows. 11

14 SECTION 7: CHANGING THE SCHEME The Managing Trustees should inform Scottish Widows at the earliest opportunity of: Any decision to amend the scheme rules or conditions in any way. The company s intention to cease contributing to the scheme. Any decision to wind up the scheme. On wind up, the scheme rules require SWTL consent to the proposed disbursement of any remaining scheme funds. Note The split of the assets between the members must be in accordance with the contributions paid in respect of each member. An automatic tax charge will be imposed by HM Revenue & Customs, where funds are not distributed in accordance with the correct split. There are legislative measures in place against the avoidance of any tax charges. These include liability by default on the company, or ultimately on the Controlling Directors personally. 12

15 IMPORTANT NOTES This material for use by UK Financial Advisers and Trustees of the scheme only and should not be distributed to or relied upon by any other person. Full terms and conditions are available on request from Scottish Widows. Charges, terms and limits may change. 13

16 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /17