24

Jun

Pre April 2006, legislation permitted drawing from a personal pension plan at age 50 but post April 2006 the rules have been amended pushing this age back to 55. (Unless an HMRC early retirement age has been agreed).

However, a transitional period permits those who reach 50 before 6th April 2010 to retain their pre simplification right to retire at 50.

If you reach age 50 before 6th April 2010 and are able to take benefits but choose not to do so, then if you have not reached age 55 before 6th April 2010 you are prevented from vesting benefits until that age is attained.

Those with dates of birth from 6th April 1955 to 5th April 1960 will be affected, the earlier dates less so than the latter.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisors dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

24

Jun

SIPP is a buzzword currently in the world of pensions but one of the forerunners to this type of pension scheme the SASS should not be forgotten, since they offer all the investment flexibility and control of the SIPP plus the additional lending functionality for the company. It is not surprising that many small companies are reviewing their arrangements in this area.

A SASS shares the same rules as a SIPP when it comes to member contributions, tax relief and benefit payments, as well as having similar investment options.

A major appeal of a SASS is the facility it provides to lend money back to the sponsoring employer, as things currently stand in the world of credit many companies are exploring this as an alternative option.

A SSAS is a company scheme where the members are usually all company directors or key staff.  A SSAS is set up by a trust deed and rules and allows members / employers, greater flexibility and control over the scheme’s assets.

Contributions paid to a SSAS are subject to the same rules as other registered pension schemes.  Consequently there is no limit on the level of member contributions but tax relief is restricted to the higher of £3,600 or 100% of UK earnings. Tax relief is also limited by the Annual Allowance.

Contributions made by the employer are also unlimited.  Employer contributions are deductible against corporation tax provided that they are wholly and exclusively for the purposes of the employer’s trade.  If an employer’s contribution is over £500,000 more than the previous year, tax relief may be spread.

Loans can be made to the sponsoring employer but are subject to certain conditions set by HMRC.  These include:

  • The loan should not exceed 50% of the net market value of the scheme’s assets
  • The loan should be secured against assets of an equal monetary value by way of a first charge
  • The loan’s terms should be no longer than 5 years
  • Interest of 1% above bank base rate should be charged on the loan

There are other methods of releasing funds from pension vehicles to assist a company’s cash flow; these include the purchase of assets from the company such as commercial property or intellectual property including trademarks.

Through a SSAS you can invest in a broad range of investments, including:

  • Commercial property and land;
  • UK quoted shares, stocks, gilts and debentures;
  • Stocks and shares quoted on a recognised overseas stock exchange;
  • Futures and options quoted on a recognised stock exchange;
  • OEICs, unit and investment trusts;
  • Hedge funds;
  • Insurance company funds;
  • Bank and building society deposits
  • Gold bullion

Shareholdings in the sponsoring employer should not exceed 5%.  Shares can also be bought in more than one sponsoring employer as long the total holdings are less than 20% and shares in any one sponsoring employer are less than 5%.

There is no restriction (apart from the self-investment restrictions above) on the percentage of shares which can be held in one company. 

SSAS’ may borrow to invest and to provide a member’s benefit which has become payable.  The maximum amount that can be borrowed is 50% of the net asset value of the scheme.

In our capacity as Independent Financial Advisers we can review your current company pension scheme arrangements or offer advice on setting-up a pension scheme for your company.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisors dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

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