Pension Planning

26 October 2012 / Insight posted in

DS writes: Recently you referred to a small self-administered pension scheme. I am considering the possibility of setting one up for our small company but I need advice. Where do I start?

Small self-administered pension schemes (SSASs) are pension funds that can be set up by trading companies to make pension provision for their directors. The directors would normally become trustees of the fund along with a pensioner trustee, who is someone approved by the Inland Revenue to ensure the scheme meets Revenue rules. The directors as trustees would therefore have control over the investments and be able to decide where to invest the funds. An example of one of the prime uses of such a scheme is where the pension scheme buys a property that the company then occupies on an arm´s-length basis. The rent paid by the company then accumulates in the scheme tax-free. Another advantage is that the directors decide on the timing and size of the contributions by the company. There is no minimum. The Revenue expects annual contributions but accepts that small-company profits can be volatile and therefore is open to flexibility. The fund has to be approved by the Revenue and any contributions by the company are tax-deductible for the company. Any investment income or capital gains of the funds are tax-free. The disadvantage is that the contributions, once made, can not be reversed. The contributions made by the company have been spent in providing a pension provision for the directors. You should ask a professional adviser to help you with your plans.