# Self Administered Pension Schemes - time has come



## amax (23 Jan 2008)

Hi Guys, I have finally reached the higher tax bracket and wish to set up a Self Administered Pension Scheme.

I have read through all the other threads but am still unsure how to initially go about this. Do i just contact my accountant and tell him I want to set this up? or do I contact a company. 

If so, can anyone recommend which one to contact


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## LDFerguson (24 Jan 2008)

If you want a self-directed pension (you invest into a policy with, for example, Standard Life or Irish Life and then instruct the company what you want your policy to purchase), any good broker should be able to set one up for you.  

Otherwise, if you want a self-administered pension you need a pensioneer trustee.  We tend to recommend Alan Morton of www.moneywise.ie for this as he's professional and knowledgeable.  Otherwise, you can probably do a Google search for "pensioneer trustee".

Liam D. Ferguson
www.ferga.com


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## ClubMan (24 Jan 2008)

amax said:


> Hi Guys, I have finally reached the higher tax bracket and wish to set up a Self Administered Pension Scheme.


Just curious - why was reaching the 41% bracket the trigger for this? Setting up a _SSAP _I mean as opposed to starting (?) a pension in the first place?


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## LDFerguson (24 Jan 2008)

I'm guessing the move into 41% was just the prompt to get a pension of some sort started, as there's no tax advantage in having a self-administered scheme over any other form of approved pension scheme.


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## ClubMan (24 Jan 2008)

Thanks. Are the charges on an _SSAP_ not higher than, say, a 0%/1% _PRSA _or the like? I realise that some people will want an _SSAP _for the flexibility and control over investments it gives them.


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## Towger (24 Jan 2008)

Clubman, that is a good point. Ideally it would make more sense to be able to use a SAPS to (forgetting the current market) buy property etc tax free. Then by retirement have built up enough rental income to see you through your later years. This cuts out the middle men who are creaming off a nice management fee from your monthly pensions contribution and overall fund value, plus you will have assets to pass on to your children, rather than an annuity which will die with you.


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## ClubMan (24 Jan 2008)

Many (most?) people saving through a pension would already have significant investments in property through their own _PPRs_. As such surely concentrating even further in domestic (?) rental/residential (?) property would not be good from a diversification point of view?


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## LDFerguson (24 Jan 2008)

Towger said:


> Clubman, that is a good point. Ideally it would make more sense to be able to use a SAPS to (forgetting the current market) buy property etc tax free. Then by retirement have built up enough rental income to see you through your later years. This cuts out the middle men who are creaming off a nice management fee from your monthly pensions contribution and overall fund value, plus you will have assets to pass on to your children, rather than an annuity which will die with you.


 
I'm not sure I understand your point.  Whether you have a SSAP or an insured pension arrangement ("Managed Fund") has no bearing on what happens to your accumulated fund at retirement.  You seem to be referring to the difference between annuities and Approved Retirement Funds.  

The point about charges is valid - most SSAPs are set up on a flat fixed-charge basis, rather than a percentage of fund assets.  But typically the charges can be €3,000 - €4,000 to set up an SSAP and €1,500 - €2,000 per year thereafter to run one.  So if your fund is <€100,000 these charges represent a very high percentage of the fund and can be bettered by an insured scheme.  

Many people set up an insured arrangement for the early years of their pension planning to build up a fund then switch to an SSAP after their fund has achieved a critical mass level that makes it economically viable.


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## boaber (24 Jan 2008)

Am I missing something?  I thought that property investment via your Pension Scheme must be at arms length?  and must be disposed off when taking your retirement benefits?


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## Stifster (24 Jan 2008)

boaber said:


> Am I missing something? I thought that property investment via your Pension Scheme must be at arms length? and must be disposed off when taking your retirement benefits?


 
I have to say I thought that that was only available to company directors.


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## Nermal (24 Jan 2008)

LDFerguson said:


> The point about charges is valid - most SSAPs are set up on a flat fixed-charge basis, rather than a percentage of fund assets. But typically the charges can be €3,000 - €4,000 to set up an SSAP and €1,500 - €2,000 per year thereafter to run one.


 
Can you do it yourself instead? Are the charges effectively just for tax returns or something like that?


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## LDFerguson (25 Jan 2008)

boaber said:


> Am I missing something? I thought that property investment via your Pension Scheme must be at arms length?


 
That's right.  Where is this contradicted above?



boaber said:


> and must be disposed off when taking your retirement benefits?


 
It is possible to transfer a property from a Self-Administered pre-retirement pension arrangement to an ARF.


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## LDFerguson (25 Jan 2008)

Stifster said:


> I have to say I thought that that was only available to company directors.


 
No, the self-employed and those in non-pensionable employment can avail of either self-directed or self-administered pension arrangements also.  The latter would be via a unit trust vehicle.


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## LDFerguson (25 Jan 2008)

Nermal said:


> Can you do it yourself instead? Are the charges effectively just for tax returns or something like that?


 
No, legislation requires you to have a pensioneer trustee to oversee your pension fund and ensure that all transactions are in accordance with Revenue rules.  Reporting is also a task of the pensioneer trustee.  Every three years, you also need an actuary to prepare a funding report.


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## boaber (25 Jan 2008)

LDFerguson said:


> That's right.  Where is this contradicted above?


I may have interpreted Towger's comment 





> plus you will have assets to pass on to your children, rather than an annuity which will die with you


 incorrectly.  I was reading this as Towger stating that you could pass the physical property onto your children.  Perhaps I interpreted it incorrectly.




> It is possible to transfer a property from a Self-Administered pre-retirement pension arrangement to an ARF.



True


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## LDFerguson (25 Jan 2008)

Ah - I see where you're coming from.  My interpretation of towger's comments was that s/he was referring to the difference between annuity (fund gone as soon as you purchase) and ARF (fund can be passed on if you die before exhausting it).


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## G123 (17 Jan 2009)

LDFerguson said:


> No, the self-employed and those in non-pensionable employment can avail of either self-directed or self-administered pension arrangements also.  The latter would be via a unit trust vehicle.



Can anyone confirm where a self-employed person can set up a self-administered pension? I've been told by one pensioneer trustee that SA Pensions are only available for Company Pensions?


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## LDFerguson (19 Jan 2009)

G123 said:


> Can anyone confirm where a self-employed person can set up a self-administered pension? I've been told by one pensioneer trustee that SA Pensions are only available for Company Pensions?


 
We offer self-directed Personal Pensions for self-employed people using a structure provided by Standard Life or Irish Life.  Independent Trustee Company offer self-administed pensions for self-employed people.  I'm sure there are others doing similar arrangements.


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## G123 (21 Jan 2009)

LDFerguson said:


> We offer self-directed Personal Pensions for self-employed people using a structure provided by Standard Life or Irish Life.  Independent Trustee Company offer self-administered pensions for self-employed people.  I'm sure there are others doing similar arrangements.



(Assuming we are saying that Self Administered is a *non-insured* arrangement)

Apparently not... I've been told that these are for Company Directors/Employees only. I can't see the logic for this though as Self Employed people can do a Self Administered ARF??


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## Conan (21 Jan 2009)

To be clear:

Self Administered Pension Schemes generally apply to Occupational Pension structures, i.e. for Company Directors
For Self Employed the legislation requires that they effect Personal Pension Plans (or PRSAs) through Insurance Companies. There are a number of providers out there that offer " self directed" Personal Pensions which offer a similar level of flexibility to SAPS (i.e. the individual can determine how the funds are invested but subject to some limitations).
ARFs are a separate product only for those who have retired and are available to individuals who retired from either Self Employed Personal Pension Plans, Occupational Pension Plans (where the individual was a 5%+ shareholder) or PRSAs. Seld Directed ARFs are available from a limited number of Qualifying Fund Managers.


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## voodoobazza (21 Jan 2009)

Have a look at incorporating your business or part of your business if possible, it will widen your scope for funding. I would steer clear of insured Self Directed personal pensions as there are rediculous layers of charges on both the ITC and Standard Life Contracts.
On the SSAPs I would not attempt to set one of these up unless you have €250K plus already in pension in various forms to transfer over to set this up,or are thinking of moving company money into a SSAPs. It simply makes no sense, certain stockbrokers in town were offering SSAPs route to clients with €40K it was madness, they got cleaned out on the management/setup and dealing charges.


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## LDFerguson (22 Jan 2009)

voodoobazza said:


> I would steer clear of insured Self Directed personal pensions as there are rediculous layers of charges on both the ITC and Standard Life Contracts.


 
Depending on the level of contribution, we set up Self Directed pensions with the following charging structure: - 


Monthly policy fee €5.42
100% allocation
No bid/offer spread
Annual management charge 1% of NAV
How is that ridiculous?


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## Conan (22 Jan 2009)

Liam,
This hardly represents the full costs?  I assume that there are additional costs associated with the investment management?  If one went the property route then costs such as stamp duty, legal costs, insurance, property management, estate agents fees etc will apply. Equally if you are buying direct equities there are additional costs.
The purpose of going the self administered route (I assume) is that you dont want to invest in Funds. Therefore the fees you ouline presumably do not necessarily represent the full costs?


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## LDFerguson (22 Jan 2009)

Hi Conan, 

Absolutely - the costs I quoted are the costs of having a self-directed plan.  What you then do with the money in your plan is up to you and may incur further costs.  Deposits won't incur charges, buying and selling shares will incur stockbroker fees, buying and selling property will incur the usual third party fees from solicitors, valuers etc.  

My point in posting is to try to establish why voodoobazza singles out Standard Life and ITC as having "ridiculous" costs.  Ridiculous compared with what?  The inference would be that some other provider is providing such services at vastly lower costs.  If so, I'd be interested to hear.


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## mlane51 (24 Jan 2009)

_you can set up a self directed pension if you are a company director some people may be in a position to set up a company in the line of their work and as a director of that company you are entitled to a self administered pension .it has lots of advantyages . I am a self employed person and i am setting up a company now for that purpose. I would be intrested iun oter peoples views_


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## headache (12 Feb 2009)

voodoobazza said:


> Have a look at incorporating your business or part of your business if possible, it will widen your scope for funding. I would steer clear of insured Self Directed personal pensions as there are rediculous layers of charges on both the ITC and Standard Life Contracts.
> On the SSAPs I would not attempt to set one of these up unless you have €250K plus already in pension in various forms to transfer over to set this up,or are thinking of moving company money into a SSAPs. It simply makes no sense, certain stockbrokers in town were offering SSAPs route to clients with €40K it was madness, they got cleaned out on the management/setup and dealing charges.


 
I find this interesting as someone has asked me to look at their SSAP for them. I know nothing about this stuff, but from what I can see, they have so far invested €146,598.  Their fund stands at €149,787. However, setup and annual fees have so far cost €15,400 (nett of VAT) after three years.  He has asked me should he move/change to something else.  If the fund doesn't improve, then by the time he retires he will owe them money 
Any suggestions?


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## LDFerguson (13 Feb 2009)

headache said:


> I find this interesting as someone has asked me to look at their SSAP for them. I know nothing about this stuff, but from what I can see, they have so far invested €146,598. Their fund stands at €149,787. However, setup and annual fees have so far cost €15,400 (nett of VAT) after three years. He has asked me should he move/change to something else. If the fund doesn't improve, then by the time he retires he will owe them money
> Any suggestions?


 
Charges do appear high, at 10% of contributions paid to date.  Why did he go for an SSAP in the first place?  What does it invest in?


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## queenlex (20 Feb 2009)

LDFerguson said:


> I'm not sure I understand your point. Whether you have a SSAP or an insured pension arrangement ("Managed Fund") has no bearing on what happens to your accumulated fund at retirement. You seem to be referring to the difference between annuities and Approved Retirement Funds.
> 
> The point about charges is valid - most SSAPs are set up on a flat fixed-charge basis, rather than a percentage of fund assets. But typically the charges can be €3,000 - €4,000 to set up an SSAP and €1,500 - €2,000 per year thereafter to run one. So if your fund is <€100,000 these charges represent a very high percentage of the fund and can be bettered by an insured scheme.
> 
> Many people set up an insured arrangement for the early years of their pension planning to build up a fund then switch to an SSAP after their fund has achieved a critical mass level that makes it economically viable.


 
Am I right in thinking then that Self-administered pensions are more suited to wealthier folk and is that why the OP is thinking of starting one since he hit the 41% bracket?  It sounds like a lot of costs to a lower earner to me.  Also when people say you tell the company what to invest in does that mean that you only tell them what percent of your pension to invest to e.g. shares, cash, bonds, etc?

Thanks for any help in advance,

Q


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## queenlex (20 Feb 2009)

ClubMan said:


> Thanks. Are the charges on an _SSAP_ not higher than, say, a 0%/1% _PRSA _or the like? I realise that some people will want an _SSAP _for the flexibility and control over investments it gives them.


 
Sorry clubman is the 0/1% the annual charge?


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## LDFerguson (20 Feb 2009)

queenlex said:


> Am I right in thinking then that Self-administered pensions are more suited to wealthier folk and is that why the OP is thinking of starting one since he hit the 41% bracket?


 
Self-administered pension funds are generally more suited to those with larger pension funds. If you're going to pay a flat fee of say €4,000 to set up a Self-Administered fund, it wouldn't make sense if your fund is €10,000 and/or your budget stretches to €100 per month. A PRSA would be far more cost effective. If you have an existing fund of €1M, the fee suddenly shrinks as a percentage. 

The tax rate issue applies to any sort of pension - someone paying tax at 41% gets more benefit from making pension contributions than someone paying tax at 20%. 



queenlex said:


> Also when people say you tell the company what to invest in does that mean that you only tell them what percent of your pension to invest to e.g. shares, cash, bonds, etc?


 
No, with self-administered or self-directed pension funds, you can choose what shares you want to buy and/or what property you want to buy and you can decide when you want to sell either. 



queenlex said:


> Sorry clubman is the 0/1% the annual charge?


 
As Clubman doesn't get seen around this parish too often these days, I'll dare to answer for him. When he refers to a 0%/1% PRSA, he's referring to a PRSA set up with 0% charges on each contribution and 1% annual fund management charge.


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## queenlex (20 Feb 2009)

Thanks very much Liam for the help, I was aware of the greater tax relief (in fact my main concern with the pension levy was the greater tax relief for people on particularly large wages, sorry for veering slightly off topic).

I was correct in my interpretation of larger earners having more reason to set up a self-ad scheme then anyway.  I guess especially with the bigger fund being more usual when buying lots of shares/big purchases like property.

I am a civil servant as you might have guessed from the above so therefore have a (very small) pension not on the big bucks thats for sure but I basically want to supplement it and thinking AVCs would be worth doing with share prices so low and property low and if for no other reason but getting tax relief for my contributions.  I know thats very simplistic but I think why not take advantage of the relief using money that I will never see again anyway.  

Finally would I set up a PRSA through any of the companies doing them, i.e. would this be the way of paying my AVCs (and where/how would I locate the 0/1% deals above)?  Sorry some of this pension stuff goes over my head even though I know some of the basic stuff I mentioned.


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## LDFerguson (23 Feb 2009)

If you're a Civil Servant, you should also investigate the possibility of Buying Back Years (Notional Service Purchase) as well as AVCs.  

Have a search on Askaboutmoney for threads entitled The Cheapest PRSA and Discount Brokers - you'll find details of various brokers offering 0%/1% PRSAs.  You should note that such deals come with no advice.


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## queenlex (24 Feb 2009)

Thanks v much Liam I think the notional years would be something I would be too young to be worth considering (early thirties) but I have read a bit about it.

I was hoping to maybe stick money into a low interest PRSA and just have it invest in cash deposits if that was possible I am very risk averse! : )


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## LDFerguson (24 Feb 2009)

Yes all PRSAs have some form of Cash Fund option which should suit you - many offer a capital guarantee that your fund value cannot fall in absolute terms, although the anticipated return is likely to be lower than inflation over time.


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