THE ITC SSAS BROCHURE www.independent-trustee.com
ITC SSAS If you are in business you know that the road is seldom smooth. It can be difficult to plan for a far-off retirement when you have immediate and pressing business financing needs. Many business people treat their business as their retirement asset and, by the time it is paying its way, they are a lot closer to retirement than they might wish and the pension question begins to loom large. The good news is it is seldom too late to avail of the tremendous tax advantages offered by investing in a pension scheme. An ITC Small Self-Administered Scheme (SSAS) is an extremely flexible arrangement that allows you the facility of: Providing for an income in retirement Reducing both corporate and personal taxes Extracting funds from a company without any income tax liability Potentially transferring assets to your next of kin And an ITC SSAS is not just attractive from a business owner perspective, it is an efficient and powerful way to reward and retain key employees. Your future. Our focus. What is a Small Self-Administered Scheme (SSAS)? A SSAS is known by a variety of names including Self-Administered Pension (SAP) and Self- Directed Trust. It is a tax-efficient investment scheme, suitable for both controlling directors and employees, allowing the holder to enjoy the greatest level of control over the direction of their investments. An ITC SSAS also offers the greatest level of flexibility in respect of contributions. There are no obligations to make regular contributions to an ITC SSAS nor are there any penalties imposed if further contributions are not made. What is the difference between a SSAS and a regular pension product? If you invest in an insurance company pension product, you must choose from the fund options available under that contract. An ITC SSAS will allow you to avail of all of the benefits of the pension structure without the obligation to invest in specific funds. It is possible to hold individual properties, land, deposits, equities and a variety of other investments directly in your scheme. You may also make significantly greater contributions to your SSAS than to a personal where contributions are limited by maximum relevant earnings thresholds. page 2 of 6
The ITC SSAS What are the tax benefits associated with an ITC SSAS? What are the costs associated with an ITC SSAS? An ITC SSAS has all the tax benefits of regular pension plans. Contributions enjoy personal tax relief and / or corporation tax relief. Returns are exempt from income tax and capital gains tax. The cost of setting up and managing your ITC SSAS is met by fees which are typically paid by your company and are fully tax-deductible. A certain portion - typically 25% of the value of the investment - may be taken tax-free at retirement and the balance of the fund may be invested in a manner which similarly enjoys income tax and capital gains tax exemption subject to certain conditions. How much can I contribute to my ITC SSAS? The ongoing cost of an SSAS is fully transparent and depends on your investment strategy. When you control the direction of your investment, you also have the power to manage the costs associated with these investments. Who can set up an ITC SSAS? The amount that you can contribute or that can be contributed on your behalf by your employer depends largely on your age and salary. An ITC SSAS is suitable for employees and salaried directors. It is most suitable for owner directors and should be the number one choice for retirement planning. For example, if you are aged 50 and earning an annual salary of 150,000, an annual contribution of approximately 373,000 between yourself and your employer is possible. Your own contributions are based on a scale of 15% to 40% of your salary to a maximum salary of 254,000 (indexed from 2007). How does an ITC SSAS benefit proprietary directors? Proprietary Directors will generally have the power to divert profits from a company into their schemes. An ITC SSAS is the most tax efficient way to transfer company profits into personal capital. page 3 of 6
The ITC SSAS Contributions from the company to the scheme are tax-deductible in the company accounts There is no tax liability in respect of these contributions All income generated by the scheme is free from income tax All capital growth in the scheme is free from capital gains tax All funds are held in trust for the investor. Once invested in the scheme they no longer form part of the assets of the company. What happens at retirement? At retirement, Proprietary Directors may choose to purchase an annuity which will guarantee an income for life, or to invest in a personally-owned Approved Retirement Fund. Investments within an Approved Retirement Fund continue to enjoy income generated free of income tax and capital appreciation gained free of capital gains tax. Income tax is liable on any amounts drawn down from the fund. See our ARF brochure for more information on Approved Retirement Funds. Warning: If you invest in this product you will not have access to your money until you retire. What are the benefits of an ITC SSAS for employees? A ITC SSAS can bring major benefits for employees, particularly in relation to tax efficiency. Example: An employer is considering giving an employee (aged 45) a discretionary bonus of 50,000. The employee will pay tax at the top rate of tax if the bonus is paid as a salary, alternatively the employer can contribute the 50,000 to an ITC SSAS. Which is the best option? Warning: The value of your pension investment may go down as well as up. You may get back less than you invest. Salary SSAS 50,000 Initial Amount 50,000 22,000* Less PAYE & PRSI nil 28,000 Amount Invested 50,000 85,468 Growth @ 8% p.a.** 152,621 At age 60 the employee is 67,153 better off with the SSAS option. * based on the lower rate of tax. **The growth rate is for illustrative purposes only and is not based on a specific index. Warning: These figures are estimates only. They are not a reliable guide to the future performance of your investment. What are the benefits of an ITC SSAS from a company perspective? The benefits to a company are numerous: Full corporation tax relief within Revenue limits on company contributions to the scheme, thereby reducing the current year s corporation tax liability Retained profits can be transferred to the scheme for the benefit of an individual Powerful positive effect on employee loyalty Ability to vary contributions to suit the company s accounts and cashflow Ability to facilitate efficient business exit and the orderly transfer of control from retiring directors to incumbents What happens if you die before retirement? In the event of your untimely death a lump sum of up to 4 times your salary can be paid to your estate tax free. In some cases this may absorb the full value of the fund. An annual income for dependents will be purchased with any surplus monies in the fund. page 4 of 6
The ITC SSAS Is it possible for my ITC SSAS to borrow to invest? Provisions contained in Finance Act 2004 now allow a SSAS to borrow to invest for your benefit. How do you go about investing in an ITC SSAS? Step 1 Contact your Financial Advisor Step 2 Your advisor will gather the required information which will allow Independent Trustee Company Ltd to draw up a trust document. Step 3 The document is signed by you and returned together with a mandate to open an operating bank account for your ITC SSAS. Step 4 ITC applies to the Revenue Commissioners for the scheme to receive tax exempt status. Step 5 Your company can transfer the required funds tot he operating bank account. Transfers out of the bank account require your signature and authority from ITC. Step 6 Now you can begin investing! page 5 of 6
Independent Trustee Company Limited Harmony Court Harmony Row Dublin 2 Tel: (01) 661 1022 Fax: (01) 661 1024 Email: info@independent-trustee.com SA 100.2.0 Effective from March 2016 www.independent-trustee.com Independent Trustee Company Limited, part of the ITC Group, is regulated by the Central Bank of Ireland. Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland and, as a result, it is not covered by the Central Bank s requirements designed to protect consumers or by a statutory compensation scheme.