Pensions

Self-Invested Personal Pension Scheme (SIPPS)

Personal pension schemes offer an excellent tax efficient method of providing for future retirement income. A SIPPS is a personal pension scheme that is established under trust and managed by Trustees for maximum flexibility and cost effectiveness.

The SIPPS offered by Fedelta is designed to meet the needs of clients with more substantial pension funds who wish to retain control over their own pension assets. Unlike “master trust” arrangements offered by some competitors, Fedelta establish separate trusts under which the client is appointed as a co-trustee and a co-signatory to all banking and investment transactions. This is important when a new relationship is formed, as clients are often reluctant to pass total control of their hard-earned pension assets to a company that they have no track record of dealing with. The client also retains the power of appointing and removing the professional trustee and therefore has ultimate flexibility and portability at all times.

Approval

To obtain maximum tax advantages the Fedelta SIPPS is designed for approval by the Assessor of Income Tax under Part 1 of the Income Tax Act 1989 and therefore all investment income and gains of the scheme are free from Manx tax. Each SIPPS is also registered and regulated by the Isle of Man Insurance and Pensions Authority under the Retirement Benefits Schemes Act 2000.

Contributions

Contributions receive full tax relief at the member's marginal rate. The Fedelta SIPPS imposes no minimum or regular contribution conditions and consequently contributions can be made at a level and frequency chosen to suit the member. Each member can contribute up to £300,000 per annum and tax relief is available up to 100% of relevant earnings. Contributions can also be accepted from a member's Employer.

Scheme Benefits

Benefits are payable at the member's discretion any time from age 50 to 75 and are not linked to the need to actually retire from employment.

On drawing benefits, up to 30% of the member's accumulated fund may be taken 'tax-free' as a lump sum payment. The balance of the fund is then used to provide a pension, calculated in accordance with tables issued by the Isle of Man Treasury, which can be varied to meet members' needs. Pension payments are made directly to the scheme member from the assets of the SIPPS. There is no requirement to purchase an insured annuity so funds are not lost as a windfall profit to an insurance company on death.

In the event of the death of the member before drawing benefits, the whole of the member's accumulated fund can be distributed tax-free. If the payment of benefits has commenced, the residual fund on death can still be distributed to beneficiaries, but subject to an IOM tax charge of 7.5%. Even this tax charge can be avoided if the residual funds are transferred tax-free to another approved Isle of Man pension scheme.

Investments

Typical investments of a SIPPS include quoted stocks and shares; deposit accounts; unit trusts; investment trusts; unit linked funds and property etc. Self employed professionals such as advocates and accountants regularly use SIPPS as a highly tax efficient vehicle for acquiring and holding their business premises.

The trustees hold the investments for the benefit of the members. Members can select how scheme funds are invested or they can arrange for the trustees to engage specialist fund managers or institutions to undertake such investment functions as may be required. Any cash held will be deposited in a dedicated bank account opened by the trustees at a bank of the member's choice. Fedelta use the “buying power” of large cash deposits (running well into nine figures) to obtain and pass on the very best deposit terms with local banks.

Unlike so called “free” or “low cost” SIPPS, which often work by requiring scheme funds to be invested with a particular (usually high cost) investment provider, the trustees of the Fedelta SIPPS are free to invest wherever they wish. On like for like comparisons, we have found that charging separate “time spent” administration fees (rather than subsidising these out of high investment charges) invariably works in the client's favour.

Transfers

The SIPPS can accept a transfer payment from any other approved pension scheme in which the members have existing pension rights (either personal or occupational). The trustees can also pay transfer payments to any other approved scheme.

The Fedelta SIPPS can be registered with HM Revenue & Customs as a Qualifying Recognised Overseas Pension Scheme (QROPS) and is therefore capable of receiving transfers of benefits from UK registered pension schemes.

Fees (subject to V.A.T)

One off compliance fee to deal with all IoM Government know your client requirements: £150.

Initial fee for the establishment of the SIPPS, including the cost of obtaining tax approval: £750 for a single member scheme or £900 for a two member scheme.

Provision of recognised trustee and administrator: minimum £375 per annum for a single member scheme or £500 per annum for a two member scheme, subject to time spent.

Exceptional fees for arranging transfers from existing pension arrangements or other special transactions will be agreed in advance.

Telephone: (01624) 622331 Facsimile: (01624) 677224
E-Mail: nrcallin@fedelta.com Internet: www.fedelta.com

This publication is for information only and does not constitute investment advice, nor should it be used as a means of communication to the general public. Professional advice should be sought for specific tax planning situations.

Fedelta Pensions Limited is Registered with the Isle of Man Insurance and Pensions Authority as a professional Retirement Benefits Schemes Administrator.