Company Pension Schemes
Small Self Administered Schemes (SSAS's)
An SSAS is an occupational arrangement usually set up for the Directors and Executives of a Company.
In order for the scheme to be accepted by the Inland Revenue as a SSAS the following criteria have to be met:
- There has to be less than 12 members
- There has to be at least one controlling Director
- Some or all of the assets invested in the scheme must be in other vehicles rather than just insurance policies.
SSASs are subject to the usual pension scheme rules, plus additional controls to take account of the fact that the trustees are directly responsible for managing the scheme and its investments, and because of the likelihood that the company directors, scheme members and trustees will be the same.
Areas of investment are strictly defined, and cannot incorporate personal items such as cars or residential property. Investments that can be accepted however include investment in the company's own shares, purchase of commercial property and loans to the company - subject to certain conditions.
The costs of establishing a SSAS vary and depend upon the complexity of the scheme.
Inland Revenue practice can and does change quickly at times, so the correct advice is vital.
Click here to request more information about Small Self Administered Schemes (SSAS's).
Self Invested Personal Pension Plans (SIPP's)
Whereas SSAS are legislated under occupational scheme rules, SIPP's offer similar advantages in terms of control of investments and flexibility of contributions, but under Personal Pension scheme rules.
This type of contract is aimed at high earners, and partnerships who can pool their funds together for investment purposes.
A SIPP is written under a separate trust and whilst an insurance company or other approved provider is needed to act as pension provider and trustee, other parts of the personal pensions package such as advice, investment management and investment administration, can be arranged elsewhere as the individual member requires.
Most of the providers offering SIPPS do so on a hybrid basis. They usually require a minimum regular premium to be invested into their own funds before any external investment is permitted.
Click here to request more information about Self Invested Personal Pension Plans (SIPP's).
Defined Benefit Schemes
This type of scheme is often also called "Final Salary Scheme" and can provide a proportion of final salary as a pension at retirement. A tax-free cash lump sum, death in service cover, and widows or widower's pensions may also be included within the benefits.
The maximum pension that can be provided is 2/3rds of final salary. Obviously, not all schemes provide the maximum permissible benefits.
In recent years, increased funding costs for this type of scheme has led companies to offer alternative arrangements - for example, a Defined Contribution Scheme.
Some schemes are contributory (i.e. the employee is also asked to contribute), and some are non-contributory (i.e. the employer bears the whole cost).
Click here to request more information about Defined Benefit Schemes.
Defined Contribution Schemes
These are Money Purchase schemes, a fixed sum, or percentage of your salary is contributed to the plan, to provide pension benefits. Unlike Defined Benefit Schemes there is no guaranteed link to your "final salary".
There are various sorts of Defined Contribution Schemes. The more common are called Group Personal Pension, Contracted In Money Purchase and Contracted Out Money Purchase Schemes.
The rules of the scheme can be that employees are required to contribute, or employee contributions may be optional.
Employer contributions can be offset against corporation tax, whilst employee contributions attract tax relief at their highest marginal rate.
Often, the pension provider will give you a choice regarding which of their funds the contributions are invested in. Consider this choice carefully - some funds may seem to offer potentially higher returns than others, but may also carry increased risk volatility.
Click here to request more information about Defined Contribution Schemes.
Stakeholder Pension Schemes
Since 8th October 2001, all companies employing five or more people have to offer either a Stakeholder Pension Scheme, or a scheme offering benefits that are eligible for an exemption.
The legislation only requires employers to offer access to a Stakeholder arrangement, employers are not legally obliged to contribute although some do, as it can help in terms of staff retention, as it is seen as a benefit of employment.
Click here to request more information about Stakeholder Pension Schemes.
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