What is a Self-Administered Pension Scheme?

A self-administered pension scheme is set up by a professional pension trustee company for a controlling director and employee. Learn everything you need to know right here.

What is a Self-Administered Pension Scheme? 

With all the different pension products on the market today, many people can bury their heads in the sand when it comes to retirement planning as they may not know what to do. A common complaint from some people is the fact they don’t have much control over how their money is invested. Well this is not the case; self-administered pension schemes have become very popular over recent years. For a corporate entrepreneur, a small self-administered pension scheme should be the number one choice for retirement planning. So, let’s take a look at self-administered pension schemes in detail.  

A self-administered pension scheme is set up by a professional pension trustee company for a controlling director and employee. SAPS provide an environment that is tax efficient in where all the profits can be controlled by the company which can be invested to offer benefits for retirement for a director. It is also known as Self-Directed Trust. With self-administered pension scheme means you yourself decide what the pension fund will be invested in. Under revenue rules, all SAPS’s must be revenue approved.  

Who can set up a Self-Administered Pension Scheme? 

Technically anybody can set up SAPS, however, it is generally in association with company directors. Owner directors should be the number one choice for retirement planning. However, whether this pension scheme type will benefit you or not depends solely on your circumstances personally. Typically, it is business directors that will establish these schemes in ways of funding their income for retirement and in ways of controlling what, when, and how they invest their funds. The traditional pension products are a great alternative strategy, and has become quite popular to many.  

What's involved in SAPS’s? 

If you want to open a pension scheme it is important you arrange an Independent-Trustee company to oversee the scheme for you and give you annual reports. All legislative guidelines must be followed. In Ireland, there are 2 platforms that will enable you to access funds through a pension scheme. You can give investment through properties either commercial or residential or you can use a traditional broker and a company to give funding investments. It is important to get working an advisor who will execute a strategy, manage and monitor it for the long-term.  

What are the Fees? 

There are fees generally paid to your trustee and advisors. The fees can vary ranging from 1% being low and 4% being high. It really depends on your trustee company the percentages can vary. What you pay depends on the strategy that you adopt and what party you are engaging with.  

There are so many benefits with getting set up with Self-Administered Pension Scheme, these include the following: 

1. The scheme can be changed to suit your need and it is flexible. 

1. The scheme is portable so if you decide to change employer you can still use it at any time. 

1. The pension scheme is tax-efficient. With any personal contributions made on your behalf, you can enjoy tax relief at a high rate of tax.  

1. The investment you have made will grow-free of both income tax and gains captial tax.  

1. In ways to reduce your tax liability, you can initiate planning with how your benefits are taken.  

1. All of your benefits can be taken and you can also retire as early as the age of 50. 

1. Your employer/company can vary contributions to your SAPS every year in order for your financial circumstances to suit the company.  

1. Within the company, the SAPS is separate and confidential from all other benefit schemes. 

 

What happens if you pass away before the money is drawn? 

At the time of your death, the full funds are used to provide benefits to your dependents.  

 

How do you get set up? 

Speak to a financial advisor or independent trustee company that has many years of experience around self-administered pension schemes.  

 

The reasons why an individual may not be able to act as a trustee 

There are several reasons these are as follows: 

1. If you have convictions for offence 

1. if you are bankrupt 

1. If you are prohibited from acting as a trustee by the pensions board  

1. If you are restricted by the companies act from acting as a director  

Author's Note

When it comes to pension schemes self-administered is a lucrative way to go. Speak to a repitable financial adviser.