Fixed Protection

If you expect the sum of your pension arrangements to be worth more than £1.5 million when you come to take your benefits, on or after 6 April 2012, you can use Fixed Protection to protect them from the lifetime allowance charge. If you do not have either ‘Primary Protection’ or ‘Enhanced Protection’ (which you would have needed to apply for prior to April 2009) you can apply for Fixed Protection. You do not need to already have built up pension rights of more than £1.5m to apply. The Lifetime Allowance (the maximum level of pensions saving allowable without tax penalties) is reducing to £1.5 million from 5 April 2012. If you have Fixed Protection your lifetime allowance will be fixed at £1.8 million rather than the standard lifetime allowance of £1.5 million (from 5 April 2012). Your Fixed Protection will become redundant if and when the standard lifetime allowance rises to be more than £1.8 million in the future.

The disadvantage to registering for Fixed Protection is that you will need to stop building up benefits (by way of making contributions) under every registered pension scheme that you belong to by 5 April 2012.

We strongly recommend that you seek advice from your Financial Adviser regarding whether registering for Fixed Protection would be of benefit to you, given you personal financial circumstances. If you wish to register for Fixed Protection, SSAS Practitioner.com Limited can do this for you as part of our fully inclusive annual fee. The registration needs to be completed by 5 April 2012. After this date the opportunity to register will be lost.

When HMRC have received and processed the registration, they will send you a certificate to state that you have Fixed Protection. You will lose Fixed Protection if you:

1) Start a new arrangement other than to accept a transfer of an existing pension plan

2) Have benefit accrual (ie make contributions)

3) Break HMRC restrictions regarding where and how you transfer benefits (SSAS Practitioner.com Limited will advise you regarding these restrictions where necessary)

If you lose Fixed Protection then you will revert to the standard Lifetime Allowance. Therefore, if the sum your pension arrangements are worth more than £1.5m, and Fixed Protection were lost, there would be a tax charge on the excess.

Transfers between registered pensions can still take place if you are registered for Fixed Protection.

In summary, clients are only likely to need Fixed Protection if they feel that benefits from all registered pension schemes will be more than £1.5 million when benefits are taken. We strongly recommend that clients discuss this with their Professional Adviser at the earliest possible opportunity given the 5 April 2012 deadline for registration. Clients who do not have a Professional Adviser can contact us. Any clients wishing to register for Fixed Protection must advise SSAS Practitioner.com Limited in writing. We will then effect this registration on clients’ behalf as part of our annual fully-inclusive flat fee of £800 + VAT.

New Drawdown Rules & Changes to Death Payments from April 2011

The government has announced a number of important changes to the rules for converting pension funds into income. From 6 April 2011, there will be new rules for pension drawdown. These will give SSAS members more flexibility and control over their pension options when they retire, and will provide the opportunity to defer taking a pension plus tax-free cash beyond age 75.

From 6th April 2011, SSAS Members will have the option of continuing normal drawdown and potentially taking tax free cash beyond age 75. This will be known as ‘Capped Drawdown’. A new option of ‘Flexible Drawdown’, subject to maintaining a secure income of £20,000 p.a., will also be available from 6th April 2011, allowing members to draw as much income as they choose from their SSAS. In both types of drawdown, the income taken is of course subject to income tax at the member’s marginal rate.

Capped Drawdown - Capped drawdown is an option to draw an income for life from the SSAS, within an annual limit, without having to purchase an annuity. It is similar to drawdown under the current rules in that it can start at any time from age 55, but can now continue beyond age 75. Those who are currently in drawdown via an alternatively secured pension (ASP; the current drawdown option for those over age 75) will automatically be converted into Capped drawdown after April 2011.

The tax rate on lump sum death payouts is currently 35% for death prior to age 75, and 82% for those drawing an ASP; under Capped drawdown, a single tax rate of 55% will apply, irrespective of age. There will continue to be no tax on pension funds where death occurs before age 75 and no benefits have been taken, or on sums left to charity.
Capped drawdown allows a pension to be paid up to a maximum amount every year. The new maximum will be set at 100% of the GAD (Government Actuary Department) rates, compared with the current maximum of 120%, so there will be a reduction in the maximum amount payable. The maximum income limits will be reviewed every 3 years before age 75 (this is currently every 5 years) and annually after age 75. Under the current rules, there is no minimum requirement to the income that can be drawn under age 75, and that remains the case. However, in future there will also be no minimum income requirement after age 75, substantially enhancing the flexibility of drawdown for the over 75s.

Flexible Drawdown - Those with secure incomes from elsewhere of over £20,000 p.a. will have no limit on the income they can take from their SSAS via drawdown. Like Capped drawdown, Flexible drawdown can start at anytime from age 55, and a single tax rate of 55% will apply upon death, irrespective of age. There will continue to be no tax on pension funds where death occurs before age 75 and no benefits have been taken, or on sums left to charity.
Flexible drawdown is an option that will give those with large funds more flexibility than everyone else. The £20,000 income required to satisfy the new minimum income requirement (MIR) can include the basic state pension, additional state pension, level annuity income and Scheme Pensions. The latter are available from a SSAS via SSAS Practitioner.com. The lump sum required to purchase an annuity sufficient to satisfy the MIR, assuming the full state pension is also payable, will be about £200,000 under prevailing annuity rates.
SSAS members considering Flexible drawdown should bear in mind that transferring a large amount of money from their pension fund into their estate, possibly at a top tax rate of 50%, might not make a lot of financial sense. Leaving it in a tax-exempt SSAS, taking annual pension withdrawals at maybe a lower rate of tax and having a 55% tax rate (but no IHT) on any residual lump sum upon death may be more attractive. SSAS members should seek financial advice before deciding upon Flexible drawdown. Those who are considering Flexible drawdown may be put off by the idea of buying an annuity to cover their minimum secure income requirement, maybe costing £200,000 or more. Fortunately, Scheme Pension (a form of income drawdown similar to an annuity) counts as secure income. Scheme Pension can be set-up for a SSAS member by SSAS Practitioner.com. Scheme Pension creates a situation where flexible drawdown is available without having to buy an annuity. Only a handful of providers (ourselves included) currently provide Scheme Pensions under SSASs, but we can see this becoming a more popular option, particularly with those SSAS members who are opposed to annuity purchase.

Conclusions - These new rules, with the exception of the increased tax on death under age 75, will benefit those who do not want to buy an annuity by age 75 or who want more flexibility and control over their pension. They also mean that investors will be able to commit long term savings to a pension, knowing that they will be able to retain control over that money right up to the day they die.
Unlike many pension providers SSAS Practitioner.com anticipate being able to provide Capped and Flexible drawdown via our SSASs from 6th April 2011. Our website and associated literature will be fully updated by then to provide our clients with as much information regarding the new rules as possible. We will also have updated administrative systems in place to ensure that our clients benefit from the increased flexibility and large potential tax savings these new rules will bring.

Reduction of Annual & Lifetime Allowances from April 2011

Reduction of Annual Allowance from April 2011

The Treasury is to cut the annual allowance for pension saving from £255,000 to £50,000 from 5th April 2011. Individuals will be able to claim full tax relief at their marginal rate, up to and including 50%. Pension savings above this level will be subject to a 55% tax charge, but individuals will be able to offset unused parts of the allowance over a three year period to allow for one-off spikes in contributions over the £50,000 limit. This change in the Annual Allowance is not as draconian as some in the pensions industry anticipated and the new rules go a long way towards simplifying a system which over the last 30 years had become too complicated and out of touch.

Reduction of Lifetime Allowance from April 2012

The Treasury also announced that the lifetime allowance for the amount that can be built up in a pension fund, and continue to receive full tax relief, has been decreased from £1.8m to £1.5m from April 2012. The Treasury will consult later this year with the pensions industry regarding measures to help those who are close to the old limit and may breach the new limit.

SSAS Contributions - Rules Applying Post April 2011

The coalition government has announced that legislation is to be introduced restricting tax relief on contributions to a level well below the present £255,000 from 6th April 2011. The government is suggesting that the present annual allowance for contributions of £255,000 may be reduced to around £30,000 - £45,000. Whilst no definate legislation has been introduced yet it is critical that clients looking to make substantial contributions consult us first.

More will follow when we have details of the forthcoming legislation.

SSAS Practitioner.com offers free take over and set up for SSASs, with low annual fees

SSAS clients may want to consider their options before continuing with the services of expensive ‘traditional’ SSAS providers, say SSAS Practitioner.com.

SSAS Practitioner.com Limited is a newly-established pensions company that has been formed in reaction to the high fees charged by traditional SSAS providers, and in the belief that SSAS charges need shaking up. SSAS Practitioner.com believes that SSASs are a hugely beneficial asset to smaller companies and are proud to be able to offer a SSAS with high-quality service at an extremely competitive price.

SSAS Practitioner.com charges £800 pa + VAT, fully inclusive (up to 4 members), for managing your SSAS. There are no ‘time-cost’ or ‘fee-menu’ style additional charges. Most providers charge extra for setting up or taking over a SSAS; not SSAS Practitioner.com. A free calculator on the SSAS Practitioner.com website illustrates the large savings available and the subsequent enhancement of retirement benefits for those willing to switch away from other, more expensive, SSAS providers.

SSAS Practitioner.com specializes in the design and administration of SSASs for the benefit of members and their companies. It offers a wealth of experience in the pensions industry, particularly in SSAS provision.

The service provided by SSAS Practitioner.com comprises comprehensive management of your SSAS and general advice. It provides impartial comments on the suitability of particular investments and makes you aware of other issues that are not always considered by investment advisers. SSAS Practitioner.com does not offer investment advice and concentrates principally on managing your scheme. It considers that this approach works best for the provision of a simple, efficient and cost-effective SSAS that maximizes the value of your pension fund.
Potential clients can apply online for set up or takeover of their SSAS on the SSAS Practitioner.com website. The website also offers a free selection of online tools and calculators of benefit to SSAS clients.

If you wish to have your SSAS administered by SSAS experts, who provide a great service at low cost, contact SSAS Practitioner.com:

0800 112 3750
info@ssaspractitioner.com

Company Website: www.ssaspractitioner.com

SSAS Practitioner.com anticipates increased popularity of loans from pensions

In these times of reduced availability of credit, the newly-established low-cost specialist SSAS provider, SSAS Practitioner.com, predicts an increase in the number of loans made from Small Self Administered Schemes to Limited Companies (loanbacks). Interest on the loan is paid directly to your pension fund, instead of to the bank. Why pay interest to the bank when you can use it to help fund your retirement?

A SSAS is the only pension scheme that allows loans directly to your business, or indeed to another business, from funds held in your pension scheme. The business borrows funds from your SSAS and repays the capital and interest to your SSAS on a monthly or quarterly basis. The interest therefore directly benefits you and accrues in a tax-exempt environment.

You can loan up to 50% of the value of your SSAS to your business. If you transfer pensions from other schemes into your SSAS (subject to obtaining financial advice), these additional funds can also be used to support a loan to your business. Furthermore, any contributions made to your SSAS can be used immediately to fund the loan, leading to significant tax advantages.

There are a few provisos. SSAS loans to your business must have security. Importantly, this safeguards your SSAS from a loan default by the borrower, which may well be your own business. The loan is secured as a first charge on any fixed asset, irrespective of who owns the asset. The fixed asset required for the charge can include machinery, residential property or commercial property (you may need to pay a solicitor to secure the charge against the loan). HMRC rules require that the security is equal to, or more valuable than, the amount of the loan, thus ensuring that your SSAS is not penalized should the borrower fail to make the required repayments. The interest on the loan must be at a commercial rate, and is set by HMRC at 1% above the average base-lending rate of the six main high street banks. The term of the loan cannot exceed five years. There must be mortgage-style equal repayments of capital and interest on the loan, be they monthly, quarterly or annually.

The tax-efficient nature of making a loan to your business is illustrated as follows:

Assuming your business pays corporation tax, contributions to your SSAS attract corporation tax relief. Half of the amount contributed can then be lent to your business as a loan. The net effect is that your company benefits from an injection of cash, whilst reducing its liability to corporation tax. In addition, the interest on the loan is paid to the SSAS rather than to the bank.

SSAS Practitioner.com believes the ability to lend money tax efficiently from a SSAS is a hugely beneficial, yet underused, attraction of SSASs.

SSAS Practitioner.com charge £800 + VAT pa, fully inclusive (up to 4 members), for managing your SSAS. There are no ‘time-cost’ or ‘fee-menu’ style additional charges. Most providers charge extra for setting up a loanback; not SSAS Practitioner.com. If you wish to have your SSAS administered by SSAS experts, who provide a great service at low cost, contact SSAS Practitioner.com:

0800 112 3750
info@ssaspractitioner.com

Case Study - Using a SSAS to purchase assets from the member or company.

Effectively 100% of the SSAS can be withdrawn in cash.

Ron has a Executive Pension Plan (EPP) with a well known Life House. The plan is worth approximately £100,000 but has markedly underperformed the market. After taking advice from his IFA, Ron establishes a SSAS with SSAS Practitioner.com. The EPP is transferred into the newly-established SSAS and so becomes an asset of the SSAS. The EPP is sold on the IFA's advice and the proceeds remain in the SSAS.

Ron has shares in his own name worth approximately £100,000 and decides to transfer these shares into his SSAS. He supplies SSAS Practitioner.com with an up-to-date valuation of the shares and SSAS Practitioner.com arranges for the shares to be transferred in the SSAS in exchange for £100,000 in cash. Ron didn’t want to sell the shares as he saw good investment potential in them; the shares are now assets of Ron's SSAS and he has £100,000 in cash.

This example also applies to the sale of any permissable investment to the SSAS from a member or company.