Self-Administered Pensions

Listen to James' Interview on Self Administered Pension Funds

It’s a common misconception that you have to be a company director to be able to have a Self-Administered Pension.

The reality is that anybody can have a Self-Administered Pension.  Some examples are: a sole-trader, someone self-employed, a company employee, or someone about to retire or already retired.  A Self-Administered Pension allows you to choose how your pension fund is being invested, like which companies and how it’s managed.  You can select individual stocks, shares and ETFs (Exchange Traded Funds).  You can also choose to trade options for income.  Trading options will allow you to generate an income from your stocks, shares and ETFs.

Think of a Self-Administered Pension as an umbrella.  Under this umbrella, you can have a Small Self-Administered Pension Scheme (SSAS) AND a Self-Invested Personal Pension (SIPP) AND an Approved Retirement Fund (ARF) AND a Personal Retirement Bond (PRB) AND a Personal Retirement Savings Account (PRSA).  Trillium Financial Services promotes your complete control over your investment strategies.

With a Self-Administered Pension, Trillium does the legwork to present suited stocks or options that will help clients meet their financial goals.  Trillium also provides individual and personal mentoring and coaching as part of the overall aim to meet each client’s objectives.

What is a self-administered pension?

Self-Administered Pensions offer the holder the opportunity to manage their own retirement choices without the investment restrictions many life companies apply to their policies.

Self-Administered Pensions are the clear choice for both experienced and new investors who wish to retain control and choice over their pension investments.

            Allows you to invest in:

• Direct Share dealing through an online broker
• Property and syndicated investments
• Bank deposit accounts
• Structured products such as tracker bonds
• ETF’s through an online broker
• Institutional Funds including many leading external investment managers
• Variety of Collective investment schemes including unit trusts arrangements

You have as much investment control as you want.  Trillium offers mentoring and coaching from how to invest in stocks to finding out how much risk you are comfortable with.  The main benefit is choice; you choose what you want and can change when you want.

Who is a Self-Administered pension for?

Directors & Key Employees:

Directors and key employees can establish a Small Self-Administered Pension Scheme.  Pension contributions allow income tax to be reduced for income earned in the taxable year.  Contribution amounts vary on age and amount of salary.  Pension contributions can result in significant tax savings.  Growth within your pension is exempt from tax and capital gain tax

Self Employed and Employees:

Self-employed and employees can invest into a Self – Administered Personal Retirement Savings Account.  This allows them to reduce their tax liability on the income they earn in the year.  Employees can put their additional voluntary contributions into a Self-Administered Personal Retirement Savings Account.  Contribution amounts will vary on age and amount of salary.  Pension contributions can result in significant tax savings.  Growth within your pension is exempt from tax and capital gain tax.  If an employee leaves employment they can also move their Occupational Pension Scheme into either a Self-Administered Personal Retirement Savings Account or a Personal Retirement Bond.  Before transferring any funds,  considerations need to be made on any retained benefits or years of service.  Trillium offers advice on reviewing all costs and benefits involved in a transfer (if client is happy to proceed) based on an informed decision that’s best for client.

For those about to retire or are in retirement:

Retired directors, self-employed or employees can go into a Self-Administered Approved Retirement Fund.  Before you put money into a Self-Administered Approved Retirement Fund you can avail of 25% tax free lump sum withdrawal upto a maximum of €200,000.  If your pension income is less than €12,700 on an annual basis you will also have to establish a Self-Administered Approved Minimum Retirement Fund of €63,500, which funds cannot be withdrawn till age 75.

How do I establish a Self-Administered Pension?

Setting up a Self-Administered Pension starts off with getting advice from a financial advisor and then contacting a pension trustee to set up a pension trust.  Next, a bank account is setup in the trust name and then you can open a stock trading account in the name of the trust and transfer assets over to begin trading.  Your pension contributions will then be made into this bank account and transferred over to the trading account at your discretion.   Any stock trading account will adhere to the trust which complies to all revenue rules.

Direct equity investments into the stockbrokers account will be set up as an advisory or execution only account.  Trillium provides advisory services to it’s clients on a fee basis.

Types of Self-Administered Pension Schemes

Self-Administered Pension Scheme (SSAPS)

A Small Self-Administered Pension Scheme (SSAPS) is an approved company sponsored pension arrangement where the member trustee decides how the funds are invested.  In general, investments are made outside of insurance companies.  The vast majority of SSAPS are established in respect of company directors or key employees.

By establishing an SSAPS the member retains control of the funds and investment decisions in his/her own scheme.  The Revenue Commissioners require that a Pensioneer Trustee, such as NewcourtPensioneer Trustees Limited, be appointed to operate such schemes.

Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)

A Self-Administered Approved Retirement Fund (ARF) is a post-retirement contract.  On retirement from a pension contract and following withdrawal of any tax efficient lump sum, the balance pension funds can be invested in a Self-Administered Approved Retirement Fund (ARF). This is subject to first having satisfied a requirement for a guaranteed minimum pension income for life of €12,700 p.a. or having invested the first €63,500 in a Self-Administered Approved Minimum Retirement Fund (AMRF).  The Self-Administered Approved Retirement Fund (ARF) was originally only accessible to individuals retiring from personal pension contracts or company directors (5%).  This option is now also available to individuals retiring from employer sponsored defined contribution pension schemes, if permitted by the Trust Deed and Rules.  This allows many individuals the opportunity to retain their retirement fund for either passing on to their spouse, the next generation or for purchase of an annuity at a later date.  It also gives an individual control of their investment decisions.

Who can invest in a Self-Administered Approved Retirement Fund?

The Self-Administered Approved Retirement Fund is an option available to:

On transfer

• Existing holders of either Self-Administered Approved Retirement Funds or Self-Administered Approved Retirement Funds with insurance companies.
• Holders of vested Personal Retirement Savings Accounts (PRSA)

On retirement

• Personal Pension holders
• Personal Retirement Savings Account policyholders
• Additional Voluntary Contribution policyholders
• Employer sponsored Defined Contribution pension schemes
• Small Self-Administered Pension Scheme (SSAPS), subject to certain conditions
• Transfers from Defined Benefit wind ups, subject to certain conditions

Investment growth generated by Self-Administered Approved Retirement Fund (ARF) and Self-Administered Approved Minimum Retirement Fund (AMRF) investments are exempt from income tax and capital gains tax in certain jurisdictions.

Investment choice, control and flexibility

The Self-Administered Approved Retirement Fund offers the holder the opportunity to manage their retirement funds without the investment restrictions usually found with traditional life assurance products.  The Self-Administered Approved Retirement Fund is designed for individuals that are comfortable with making their own investment decisions and have a clear understanding of investment risk.

As with all Self-Administered Pensions, funds can be spread between a wide range of allowable investments including:

• Direct share dealing facilities through a nominee stock broking account/online platform
• Direct property and syndicated investments
• Bank deposit accounts
• Structured products such as tracker bonds
• Institutional funds including many leading external investment managers
• A variety of collective investment schemes including unit trust arrangements

Unlike a life assurance company, Self-Administered Approved Retirement Fund assets are held in a trust on behalf of the Self-Administered Approved Retirement Fund investor.  This means that clients’ assets are not held on a pensioneers trustee’s balance sheet.  All accounts are individually designated in the clients name and the client is a co-signatory on their investments and individual bank accounts.

Existing pension assets can be transferred in specie to a Self-Administered Approved Retirement Fund.  For example, property held in any existing Small Self-Administered Pension Scheme (SSAPS) can be transferred into a Self-Administered Approved Retirement Fund. This allows the Self-Administered Approved Retirement Fund holder to retain any direct property as a retirement fund asset and have the rental income as a pension.

Self-Administered Approved Retirement Fund investments where holders are over age 60 for the full year of assessment, are currently subject to imputed distribution requirements of 5% or 6% annually depending on the size of the retirement fund.  Self-Administered Approved Minimum Retirement Funds are not subject to these rules.  Capital held in an Self-Administered Approved Minimum Retirement Fund is not accessible until the holder reaches age 75, however, any investment growth may be withdrawn.

Self-Administered Personal Retirement Savings Account (PRSA)

A Self-Administered Personal Retirement Savings Account (PRSA) is a long term pension savings product available to all individuals under the age of 75.  It is designed, primarily, as a pre-retirement vehicle enabling individuals to save for retirement in a flexible manner.  Tax relief is available on an individual’s personal contributions subject to age and income based limits.  Employers must provide a payroll facility for deductions to a Self-Administered Personal Retirement Savings Account (PRSA) under the net pay system; employers can also contribute to a Self-Administered Personal Retirement Savings Account (PRSA) though they are not obliged to do so.

There are two types of Self-Administered Personal Retirement Savings Accounts (PRSA); standard and non-standard.  The difference between the two is the maximum charging structure and the type of assets in which you can invest.

Benefits can usually be taken from age 60.

Who can invest in a Self-Administered Personal Retirement Savings Account?

Self-Administered Personal Retirement Savings Account (PRSA) are available to all individuals under 75, regardless of level of income or employment status.

The Self-Administered Personal Retirement Savings Account (PRSA) may specifically appeal to:

• Individuals who do not qualify for membership of an employer sponsored Defined Contribution (DC) scheme
• Members of company sponsored scheme that do not offer an Additional Voluntary Contribution (AVC) facility
• Company directors and individuals with self-employed income
• Existing holders of either Self-Administered Personal Retirement Savings Account (PRSA) or Personal Retirement Savings Accounts (PRSAs) with insurance companies.
• Those wishing to transfer benefits to Ireland from overseas arrangements (under QROPS rules)
• Holders of vested Personal Retirement Savings Accounts (PRSAs)
• Deferred scheme members who have less than 15 years’ service.

What is a ‘vested’ Personal Retirement Savings Account?

A vested Personal Retirement Savings Account (PRSA) is the term used to refer to a Personal Retirement Savings Account (PRSA) contract from which the holder has retired.  The client has taken their tax efficient cash portion of their retirement savings and has left the balance of their funds in their Personal Retirement Savings Account (PRSA).  The remaining balance remains in the policy.  If the holder does not have pension income of €12,700 p.a, the first €63,500 must be ‘ring-fenced’ for this purpose.

A vested Personal Retirement Savings Account (PRSA)  is subject to the same rules as an Approved Retirement Fund with regard to imputed distributions.

Investment growth generated by a vested Personal Retirement Savings Account (PRSA) is exempt from income tax and capital gains tax in certain jurisdictions.

Investment choice, control and flexibility 

The Self-Administered Personal Retirement Savings Account (PRSA) is a non-standard Self-Administered Personal Retirement Savings Account (PRSA) contract.  It offers the Self-Administered Personal Retirement Savings Account (PRSA) holder the opportunity to manage their retirement funds without the investment restrictions found with many traditional life company contracts.  The Self-Administered Personal Retirement Savings Account (PRSA) is best suited to individuals that have a clear understanding of investment risk and prefer to retain control over the investments they choose for their pension.

As with all our Self-Administered Pensions, funds can be spread across a wide range of allowable investments including:

• Direct share dealing facilities through a nominee stock broking account/online platform
• Direct property and syndicated investments
• Bank deposit accounts
• Structured products such as tracker bonds
• Institutional funds including many leading external investment managers
• A variety of collective investment schemes including unit trust arrangements

Personal Retirement Bond (PRB)

A Personal Retirement Bond (PRB) is a single premium pension contract set up by a member of an employer sponsored pension scheme for their benefit on leaving the scheme.  The value of their fund on leaving the company pension scheme is invested in the bond in their name.  It is then an individual/personal contract between the holder and the pension provider.  On retirement the holder of the bond can use the proceeds of the PRB to provide retirement benefits.

On retirement, the bondholder is entitled to the same options with their fund as they had under their previous employers’ pension scheme.  It is usually permissible to retire from a PRB at age 50 years and onwards subject to Revenue rules.

Who can invest in a Self-Invested PRB?

Self-Invested PRB is available to:

• Existing Personal Retirement Bonds holders
• Deferred members of company pension schemes
• Members of either DC or DB company pension schemes which are winding up

Investment choice, control and flexibility

As one of only a small number of Self-Invested Personal Retirement Bonds in the Irish market, the distinct advantage of our PRB contract is the flexibility of investment options.  The holder of a Self-Invested PRB is not tied to an age/risk related ‘lifestyle’ investment strategy or a strategy defined by trustees and previous employers.  The PRB holder can make his or her own investment decisions and retain control of their retirement fund.

As with all of Self-Administered Pensions, funds can be spread across a wide range of allowable investments including:

• Direct share dealing facilities through a nominee stock broking account/online platform
• Direct property and syndicated investments
• Bank deposit accounts
• Structured Products such as tracker bonds
• Institutional funds including many leading external investment managers
• A variety of collective investment schemes including unit trust arrangements

Benefits of Self-Administered Pension

For Employer

• Contributions to Self-Administered Pensions are allowed as an expense for tax purposes (within Revenue limits)
• No personal tax liability for the scheme member
• Contributions can be varied year by year to scheme member

For Employees

• Control of investment assets, and can control as much or as little depending on knowledge and comfortable with
• Benefits can be accessed from age 50
• Personal contributions are allowed against income tax (within Revenue limits)
• Contributions do not create income tax liability for the employee

For Both Employer & Employees

• Similar to a Self-Directed pension but no Insurance company is used in the provision of the pension structure.
• Complete transparency of fees associated with Self-Administered Pensions
• All income and gains in a Self-Administered Pensions are exempt from Income Tax and Capital Gains Tax.

Trillium works with a number of different pension trustees that are revenue approved.  A trustee will make sure that all reporting and legal requirements are adhered to that revenue and the pensions board require.

Cons of Self-Administered Pension

• Minimum investments are between €30,000 to €50,000
• Set-up costs run between €2,500 to €5,000 and annual running costs are between .25% to 1%, with minimums of €800 to €1500 per annum.

Contact us today at 01 442 9950 or email us at James@Trillium.ie.