Under current legislation a Worcester Pension SSAS can borrow up to 50% of the value of the funds held. This might relate to the purchase of property or in order to increase liquidity to invest in other assets or loan back to an employer for commercial purposes.
Loans are also subject to the terms of banks and other lenders.
The investment policy is set by the member trustees under our guidance, but we do not provide investment advice. Investment advice can be provided by a suitably qualified IFA or investment manager of your choice. This will enable members to hold investment accounts where they choose to invest in readily realisable investments such as shares, government gilts, corporate bonds, exchange traded funds, warrants, futures, investment trusts, open ended investment Companies, unit trusts, REITs, Property Funds, Insurance Funds, and many other similar authorised collective funds.
These investment accounts are held by the Trust and all transactions are passed to and from the scheme bank account. Schemes can hold individual deposit accounts. We do not share in any part of the interest earned, which is all paid to the scheme itself.
A Worcester Pension SASS can invest in property but this must be commercial not residential, and can include land. The property is held in the names of the trustees. Often clients wish to buy property from which they operate their own businesses, sometimes the property is already owned by their company. This is perfectly acceptable provided all transactions are conducted on an ‘arms’ length’ basis and where appropriate with qualified advice, for example on agreeing purchase price and rental values.
A Worcester Pension SSAS can borrow to support property purchase of other allowable investments. This is subject to certain limits (see Can a Worcester Pensions SSAS borrow to invest?).
A Worcester Pension SSAS can invest in unlisted securities, small companies and the sponsoring employer, provided that HMRC rules are complied with and appropriate due diligence carried out.
A Worcester Pension SSAS can loan money back to the sponsoring employer at commercial rates of interest, for commercial purposes and subject to HMRC rules.
The maximum amount of loans back to sponsoring employers is 50% of total fund values held.
All gains on investments and all income derived from investments, are free of Capital gains or Income taxes.
As with all registered pensions, contributions that are made within the limits set by the Treasury and HMRC are allowable for tax relief, either as an employer where corporation tax is saved, or as an employee, where relief is granted through self-assessment.
When funds are invested within a Worcester Pension SSAS all investment gains are free of capital gains taxes and all income is free of income taxes. So, for example, where commercial property is held the rents are allowable against the corporation tax liability of the tenant, even if that is the member’s own company, whilst the rent income is not taxed within the pension scheme.
Likewise, where loans are made to the sponsoring employers they are allowed against corporation tax in the accounts of the sponsoring employer and tax free when received by the Worcester Pension SSAS.
There are limits on the amount each member can contribute in line with all other pensions and advice can be provided on the maximum amount applicable to each member. Where contributions exceed the annual allowances available, loss of tax relief and tax charges can apply. Unused allowances can be brought forward from the previous three tax years.
Those on high incomes and those who have started drawing pensions are subject to restrictions on the amount they can contribute.
Each member has a maximum amount they can hold in their pensions referred to as the Lifetime Allowance.
On taking benefits, members can take a pension commencement lump sum which is tax free (see How do I take benefits from my Worcester Pensions SSAS?). Further benefits are subject to the members income tax rates.
Funds held within a Worcester Pensions SSAS are free of Inheritance tax.
As with all registered pensions, benefits can be taken at the recognised retirement age, currently 55.
Benefits are taken as either a pension commencement lump sum (PCLS) of up to 25% of the whole fund value, or up to the lifetime allowance if exceeded. Income can then can be taken from the remaining fund, subject to member’s personal taxation. The amount that can be taken can be between 0% and 100% of the remaining fund after PCLS taken.
Alternatively, members can take benefits from a proportion of their fund, and from that proportion apply the above method. In this way PCLS and taxable income can be ‘phased’ over several tax years.
Income can be paid annually, quarterly or monthly.
Income can be reviewed annually, stopped or started whenever appropriate to meet a member’s needs.
You should take advice from a qualified Independent Financial Adviser or Chartered Financial Planner before drawing benefits.
All members are asked to complete a nomination of beneficiary form. This informs the Trustees whom the member wants their fund to be paid out to. The nominated beneficiary or beneficiaries, as the member may have several, can leave the funds invested and become a member of the scheme or have the funds paid out.
Because the Worcester Pensions SSAS is a discretionary trust the value is not included in the member’s estate for IHT.
If the member dies under age 75 the proceeds are transferred tax free and if left in the scheme, or transferred to another registered pension scheme, will remain so.
If the member is over 75 the proceeds are taxable at the beneficiaries’ tax rates.
We maintain all the required records for each member and the scheme. We complete the annual returns, accounts and scheme tax returns, to be filed as required. Our responsibility is to ensure the scheme complies with the rules. We, therefore, deal with HMRC, the Pension Regulator, The Information Commissioner and any other relevant third party.
We monitor all rent collection, loan repayments both received and made, collection of investment income and transfers between the scheme account and investment accounts or deposit accounts.
Where VAT applies, for example on commercial property, we can deal with the VAT including preparation of VAT returns.
We deal with the deduction of tax from pension income payments and we produce the relevant certificates required relating to the lifetime allowance.
We produce the regular scheme statements, which are generally produced quarterly for the majority of schemes.
Decisions are made by the Member Trustee and the Professional Trustee. Usually, all members are trustees.
Clearly, the Member Trustee’s wishes are paramount and provided the pension scheme regulations and legislation is complied with, the Professional Trustee will not oppose any proposal made by the Member Trustees.
All decisions are recorded in resolutions and/or minutes of meetings. Trustees meetings are held according to the needs of the scheme and are generally held once a year.
Contact with members and their advisers is as frequent as desired or needed.
We appoint, on behalf of all the trustees, third party advisers, such as solicitors, investment managers, property valuers, accountants, etc who will act for the scheme, as and when required. Where members wish to use a particular third party, members wishes will be taken into account, as far as possible.
When the scheme is borrowing money for any purpose, we will deal with the required paperwork and make the required arrangements.
Members benefits are not affected by individual bankruptcy.
If the sponsoring employer becomes insolvent the scheme cannot be accessed by the administrator or liquidator, unless a deliberate attempt to defraud creditors is proven.
In the unlikely event that Worcester Pensions Ltd should become insolvent, the scheme is unaffected as Worcester Pensions Ltd are not trustees. The Professional Trustees are registered as the formal administrators and can obtain the required services elsewhere. Worcester Pensions Ltd has no claim against the scheme unless there are fees outstanding and only to the extent of such fees. Worcester Pensions Ltd has no rights to the scheme assets.
When a client decides they wish to proceed we capture certain essential data, relating to the proposed members, their identity, source of funds, age, marital status, income and tax position, the level of contributions intended and any known investments planned. If transfers from other pensions are planned further information is required.
We also collect information about the sponsoring company.
Payment is required for the formation fees.
We prepare a draft deed forming the scheme, having agreed a name with the members. Application is made to HMRC to approve the scheme and a scheme number obtained.
The scheme is registered with the Pensions Regulator. The scheme is registered with the Information Commissioner.
The scheme bank account is opened, contributions and transfers in can be received and recorded against individual members.