| The UK Personal Pension (Inc SIPP) | | | | considering investing typically £150,000 +. Also, |
| In the UK, under the new rules introduced with effect | | | | although such schemes may let the member |
| of April 29th 2009, there is still scope for an individual | | | | contribute unlimited amounts into the scheme. There is |
| to contribute an amount up to the level of their | | | | NO entitlement to Income Tax relief on the |
| earnings and get tax relief on their contributions, (as | | | | contributions either for the member or for any |
| long as their income is not in excess of | | | | employer contributions. |
| £150,000). For those who are or have relevant | | | | At this stage it does not look too attractive, yet for the |
| income above that amount, see the document | | | | right individuals they are popular. Their attraction lays in |
| 'Pensions: Limiting Tax Relief for High Income Individuals' | | | | the longer term tax planning and the choice and control |
| on the HMRC website or click on the link below. This | | | | the afford the member. |
| will entitle a member who makes contributions to tax | | | | Once monies are in the scheme, the internal returns |
| relief at either 20% or 40% depending on their | | | | are also free of tax. |
| earnings. If you are a business owner and your | | | | The scheme can make loans to the member, who can |
| company makes the contribution on your behalf, then | | | | then use the money to spend, (though there may be |
| your company has saved both the Corporation Tax | | | | need to provision repayment at a later date). The |
| on the contribution and neither is it subject to National | | | | member can invest the proceeds and even where |
| Insurance. Tax Relief on member contributions are an | | | | appropriate to make a Directors loan back into the |
| immediate boost to the value of the fund and in the | | | | members own company. It may be attractive to |
| case of a company contribution, it is a very tax | | | | secure such loans against agreed member assets, |
| efficient manner of securing long term benefits of the | | | | thus protecting the wealth against unforeseen future |
| company's wealth for the member. Additionally, if set | | | | solvency problems a member or his/her business may |
| up correctly, should the member die before drawing | | | | face. |
| the benefits, the value of the funds can pass free of | | | | In addition to the usual investments, the scheme can |
| Inheritance Tax IHT) to the chosen beneficiaries. This | | | | purchase land, residential and commercial property, |
| can be another 40% tax saving. | | | | even in the UK, it can operate businesses and |
| The downside of the tax relief on contributions and the | | | | developments even go into joint business ventures in |
| largely free of tax growth on the funds, is the | | | | the UK and the returns it makes on its investments |
| restrictions placed upon access to the funds. | | | | can be tax free. Clearly there is much more choice |
| Essentially, you no longer have access to all of the | | | | and control for the member than with the UK |
| capital. When you do take the benefits, (which from | | | | 'approved pension'. |
| 2010/11 will be from age 55+) you can have up to 25% | | | | In terms of the member ultimately drawing pension |
| of the value of the fund as Tax Free Cash, (TFC). | | | | benefits from the scheme, there is far more flexibility |
| The remainder must be used to provide member | | | | and consequently more scope to mitigate income tax. |
| benefits. Any benefits over and above the TFC are | | | | Again, if set up correctly, upon the members death |
| subject to Income Tax at the prevailing rates. In the | | | | prior to drawing pension benefits, the assets of the |
| interim, as a member you can exercise some control | | | | scheme can pass free of IHT to chosen beneficiaries. |
| by way of what the funds are invested in. This can be | | | | Clearly there are other issues to consider when |
| normal pooled investments, directly into equities or | | | | deciding on what avenue one should take but this |
| even the purchase of commercial property. | | | | should serve to notify you the reader, there may be |
| The Offshore Unapproved Pension | | | | ideal opportunities out there which you are probably |
| On the downside, due to the much higher costs | | | | not aware of and the importance of looking at the |
| associated with the initial set up and operation of such | | | | bigger picture when making your decisions. |
| schemes, they are generally only attractive to those | | | | |