Who is Pension Practitioner .com?
If you are a mortgage provider, I.F.A., property developer, tax adviser or accountant; you need to know that in a recent survey by Pension Professional Magazine, Pension Practitioner .com appeared head and shoulders above the competition for small self administered schemes (SSAS).
This select team of pension experts structure and administer various types of small self administered schemes (SSAS) for businesses and entrepreneurs.
Pension Practitioner .com do not simply keep your scheme tax efficient. They guide professional advisers in unique ways for example, re-leverage your client’s pension fund to aid business with loans, in-specie contributions and transactions, all with the same tax efficient, low cost ethos the Company are getting a reputation for.
Pension Practitioner .com help property developers cut corporation tax when they purchase commercial property.
If your business needs to purchase additional property, but you must keep up your working capital and your business faces a high tax bill; consult Pension Practitioner .com.
They administer for you a small self administered scheme ( SSAS) and ensure that you are registered for tax relief. Your contributions may be structured as a tax deductible expense. This can take the form of an in-specie contribution of a share of or the whole of one of your properties to your pension scheme. Your pension scheme can if necessary, secure a commercial mortgage with your company being co-owner - this often arises where the borrowing requirement is more than 50% of the value of your pension scheme.
By contributing property, land or a share to your small self administered scheme (SSAS) you may enjoy a lower corporation tax and allow the property to build up in the scheme free of capital gains tax.
How a Pension Practitioner .com S.S.A.S., can help you cut tax and extract cash from your property without a remortgage whilst getting tax relief.
<!– @page { margin: 2cm } P { margin-bottom: 0.21cm } –>
Pension Practitioner .com will establish your small self administered scheme and insure you are registered for tax relief.
After regulated advice you transfer your old pension into your SSAS, account. Your scheme then purchases equity in the property (Subject to independent valuation.). This releases cash to you. A further in-specie contribution is made from the property to your scheme. This contribution generates full tax relief.
Capital gains tax is off-set from tax relief accured. No stamp duty arises if the overall transaction is less than 150,000 pounds and does not form a series of transaction exceeding this threshold.
Is a SSAS better than a SIPP?
In discussion with Pension Practitioner .com managers. The first of three scheduled meetings. We considered how a SIPP (Self-Invested Personal Pension) could be relevant from a tax perspective, for sheltering properties and other possible investments. However, Pension Practitioner .com stated that there are circumstances, especially for small to medium sized family businesses, when SIPPs chief rival, the SSAS (Small Self-Administered Scheme) is a more cost effective simpler to manage instrument.
A SSAS is best looked at as the occupational equivalent of a SIPP, because it is established by an employer for the benefit of all or some of their employees. Pension Practitioner .com managers explained the member trustees are responsible for the proper running of the scheme, including the making of investment decisions on the scheme’s assets.
I questioned that since ‘pension simplification’ legislation took effect in April 2006, many of the differences between SIPP and SSAS have been annulled with regard to benefit and contribution limits? The SSAS experts at Pension Practitioner .com showed that there are other important differences, of which one needs to be aware. Particularly if investments in property or one needs loans to survive the effects of the credit crunch, are being considered.
Pension Practitioner .com clarified that although SIPPs and SSAS have the same borrowing limit of 50% of the net fund assets, it is invariably simpler to facilitate borrowing on a SSAS, and less risky. This is because of the non-allocation of the scheme’s total assets rather (as with SIPPs) than on those of each individual SIPP fund.
Top benefits of a COMMON TRUST for SSAS members.
When a SSAS purchases a property on the behalf of its’ members, it does so as a single purchase transaction. It holds the asset in a non-allocated common trust. It is for the benefit of all members, in proportion to their share of the pension fund. The U.K. top rated SSAS provider’s, Pension Practitioner .com, stated that this differs from a SIPP, where each individual member owns a proportion of the property through their own plan. This becomes complex where members are related and benefits will be drawn at different times and there is no desire to sell the property to raise the cash in order to provide benefit payments.
A highlighted example is the scenario where, Mum and Dad wish to begin drawing benefits from the SSAS. Those benefits can be provided from other scheme assets, rather than selling a part of the property to younger scheme members, ie. the children. Pension Practitioner .com pointed out that with a collection of SIPPs, the children’s plans may have to purchase a greater share of the property from Mum and Dad’s SIPP, which is difficult or impossible if the children’s SIPPs require borrowing and they are at or even near to the stipulated 50% of the funds maximum borrowing limit.
It is not only family scenarios that prospers from SSAS flexibility of how benefits are provided. Pension Practitioner .com explained that if a director resigns from the business, whilst owning a part of the business property through their SIPP, the remaining scheme members being unlikely to want the property to be continued to be owned as an investment by a now unconnected individual. This does not arise with SSAS, as the former member whilst still a trustee, the expectation would be to make a cash transfer payment to a pension plan of their choice, severing their involvement with company and scheme affairs.
Pension Practitioner .com added further that one needs to ensure liquidity with SSAS, to provide retirement benefits, transfer values or death benefits. But as none of the scheme assets are earmarked to individual members, there is much greater flexibility over how payments are provided for and made. When an illiquid asset such as a business property is owned by a collection of SIPPs, there is a potential liquidity problem if any one of those SIPPs needs to make a payment of retirement, death or transfer benefits.
SSAS loans - Five conditions for the principal and associated companies
The rules state;
-
The maximum loan is 50% of net assets of the scheme at the time of the loan.
- The loan is for a maximum period of five years.
-
The interest rate has to be a minimum of 1% over the average of six high-street bank base rates.
-
The capital and interest is repayable equally over the period of the loan. The debt payment can be rolled over for one year at no cost.
-
The loan must be secured by first charge on an asset of agreed value to the loan plus interest.
The issue of repayment throughout the period of the loan can be overcome. There is no stipulation in the Finance Act to stop a loan from being taken out for one year, repaid with interest at the end of the year and another and another loan immediately taken out. Documenting the loan and ensuring security is in place can be handled by the schemes administrator/practitioner.
In the current economic climate, we constantly hear that on a daily basis companies cannot raise capital. Regardless of Government suppositions, most business persons will tell you that borrowing money is extremely difficult. “The banks are just not lending” to quote one source. This make the possibility of being able to borrow from their pension scheme a significant benefit.
Established companies with excellent track records and adequate security are finding it difficult to impossible to secure lines of credit. Those who gain credit do so at extraordinarily high rates. Base plus 5% to base plus 8% not unheard of.
The Bank of England may drop base rates, but banks are not passing that rate down.
Experts are saying the banking system will never be the same again. Business lending will be more difficult this year than last year. But for those who know, thank goodness for the SSAS.
6 Points of today’s SSAS
Many experts mistakenly announced the doom of the SSAS (Small Self-Administered Scheme) at pension simplification. With every piece of pension legislation announced, the cry went up. As so often when one follows the heard blindly, all were summarily proved wrong. The “why have a SSAS when you can have a SIPP,” has long since disappeared.
To date, with every every amended Finance Act, six significant differences stand out all the more.
-
A SIPP is established and regulated by a person or body regulated by the FSA, whereas a SSAS is established by an employer and administered by the Pension Regulator.
-
A SSAS may make secured loans back to the principal or connected employer of up to 50% of the funds net assets, for a maximum of five years. A SIPP with no principal or connected employer, cannot make loans to the members, his business or any other connected parties.
-
Within the SSAS, the employer may dismiss any administrator. When it comes to acceptable investments, the SSAS provider must be as flexible as possible. If they run a restrictive list as many SIPP operators do, they cannot expect to remain as administrator or trustee for long.
-
Within a SSAS, all assets are held in a common trust for all members. This means, the common trust can hold property for the benefit of members of the scheme. Every member has an ‘actuarial interest’ in the scheme, not in specific assets. Another advantage is that when members move on or die, assets such as property need not be sold. SIPPs are individual arrangements therefore hold individual assets in a plan for each member. When a change occurs, there is considerable upheaval. In some instances that means selling the property on the open market to satisfy the SIPP operator. This often turns out to be very costly and complex.
-
Many SIPP providers are the sole trustee, which means they own the asset as opposed to each individual SSAS having it’s own trustee. This may include a professional trustee. The great issue with being a sole trustee, is, this can lead to conflict with members. This occurs when members’ wishes are in opposition to the risk management strategy of the operator.
-
SSAS can offer scheme pensions at retirement. SIPPs are established under a master trust, with each member having a different policy within the scheme. This means the scheme pension option is not available to most SIPP members.
Borrowing from your SSAS Pension fund to aid your company
In the third of my conversations with Pension Practitioner .com, who are the U. K’s leading SSAS provider. I put to them that in the current economic climate many companies may not have surplus fund to put away into pension funds for the future whilst the present is so uncertain.
This notion is out-dated. The managers of Pension Practitioner .com demonstrated that unlike a SIPP (Self-Invested Personal Pension), a SSAS (Small Self-Administered Scheme) may lend a portion of its capital to the sponsoring company.
This is useful for a number of reasons, not least if the company is considering buying plant, machinery or investing in research and development, activities which already attract tax advantages themselves.
The maximum overall loan to the principal and participating employees is 50% of the assets of the scheme, valued at the date of the loan. This is subject to certain stipulations;
-
- The loan is secured by first charge on an asset of adequate value.
- Maximum term of 5 years.
-
Minimum interest rate of 1% above the base lending rate of the six leading high-street banks.
- The repayment of the loan capital plus interest in equal installments over the loan period. One annual payment may be rolled over for a year.
Pension Practitioner .com clarified that third party loans may be made, but not to member trustees or persons connected to them. Schemes violating this rule, making payments to members or passing assets to members or connected parties outside of the rules will face tax penalties and charges. Advice should be sought before loans, transfers or investments are made.
In practice most decent SSAS administrators will insist on a practitioner being used and many provide one as part of the standard administration fees.
SSAS needs to be carefully considered along side SIPP to determine which is best. The certain fact is SIPP is not the only answer for secure shelter for family companies.
The future for SSAS.
<!– @page { margin: 2cm } P { margin-bottom: 0.21cm } A:link { so-language: zxx } –>
The Small Self-Administered Scheme (SSAS) market is old and credible but largely unknown. Too long has this jem been hidden in the shadow of the Self-Invested Personal Pension (SIPP). Many do not truly realise what a SSAS offers.
For going on 35 years SSAS has languished behind SIPP in general popularity, used by only the elect few. One commentator called SSAS the private bank of pensions.
Rule changes by HMRC has unlocked the SSAS for the general market and informed persons ought to know.
Pension Practitioner .com the leading provider elaborated on the new potential for the unlocked SSAS. Pension analysts at the firm confirmed that between persons with family connections, SSAS remains to be better in all regards to SIPP. But now any key employee, property developer, shareholding director of a private company or partnership needs to pay attention.
I asked Pension Practitioner .com to summarize in a word what they basically mean. ‘Control’ was the response. At less cost than a SIPP, many business managers opt for the premium of control SSAS offers.
Pension Practitioner .com SSAS services commentary.
I asked Pension Practitioner .com, what happens if a SSAS provider’s service practitioner fails to deliver? Simply appoint another they said. They, for example, do not impose take-over fees.
What I wanted to get to was the real and practical investment reasons which differentiate SSAS from SIPP. The managers of Pension Practitioner .com responded by first clarifying that assets are held by the members as trustees.
The other main advantage is that SSAS operate on a ‘non-allocated’ and pooled investment approach. This means that not only are assets jointly owned, but this allows for a fluid transfer of assets between generations as retired member’s fund decline and newer members fund builds up. This is especially beneficial for situations where members are related or work for the same company.
The last important difference said Pension Practitioner .com, after cost is that of control. The real choice one is making is ‘ do I want to own the pension scheme, (SSAS) or should I piggyback on someone else’s, (SIPP). The former is more pro-active and involves more paperwork. But with a designated pension practitioner this issue falls away.
In summary, rather than debate the merits of SSAS over SIPPs. The definitive proof is obvious. Gone now are the reasons for SIPP, like, different funding, investing, borrowing and benefit rules. The managers of Pension Practitioner .com made abundantly clear that SSAS are of credit to their owners, but as a pension fund they do need planning and attention. This brings in the need for a practitioner to consult, to accept the obligation and duties of administration. To maintain accounting records and prepare annual accounts. To complete and submit HMRC scheme returns, event reports and quarterly accounts for tax returns.
Pension Practitioner .com finished by saying that, “SSAS are not a mass-market product. But for those clients who take up this valuable instrument, most always question why they never opened a SSAS earlier.”
The best SSAS for your business
SSAS pensions are the best and newest solution for informed persons. Business owners and directors all over the UK are using them with advice from their financial advisors. Smart bespoken schemes to leverage their enterprises through the credit crunch into the ‘black’.
As with all new things, there are now a deluge of providers offering services, most of which are good. Never-the- less, pension experts at Pension Practitioner .Com stand by their business model of only bespoken SSAS administration service.
After recently topping a survey of SSAS administration providers and being hotly tipped to win industry awards, I asked them to differentiate between the different classes of SSAS.
Insured SSAS - Are offered by insurance companies, one is able to self invest the assets of the scheme, but there is a requirement for a minimum amount of money to be invested in the insurance company’s range of funds.
Hybrid SSAS - This is also provided by insurance companies, once the scheme assets are divided into insured investments and self investment, it is deemed that this is a hybrid arrangement.
Deferred SSAS - is when the insurance company will operate the fund on an insured basis with the intention of switching to a hybrid or insured SSAS in the future.
Full SSAS - This is the product administered by Pension Practitioner .Com. Under this method, there is no insurance company or third party trustee involved. The members are the trustees and make the investment decisions for themselves, they are obliged to consider investment advice with their assets.
Contracted Out SSAS – This is where the scheme is contracted out of the state second pension scheme and a proportion of national insurance rebate is paid to the SSAS. Contributions can be paid from the business or members however the scheme is limited to investment of funds in insurance based contracts and cash deposits.
Pension administration experts at Pension Practitioner .Com stated that full SSAS is a huge plus to a company, and that it is best realised by using a purpose driven SSAS tailored to individual company requirements, and under your own control.
Bespoken SSAS only serves the clients’ needs. Established on their behalf and designed and invested as per the clients wishes, often this is used to aid companies leverage finance, and increase their tax efficiency whilst decreasing tax exposure. There are also huge efficiencies when purchasing commercial properties.
Typically Pension Practitioner .Com charge a fixed annual fee. This certainty of cost, is amongst the lowest fee basis in the industry and coupled with their online facilities are likely to remain competitive.
Financial advisors are increasingly looking to this source of pension business as an alternative to SIPPS, in my mind they should consider Pension Practitioner .Com as the chosen administration provider for their SSAS business.
