Tips for Testing Times

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Tips for Testing Times
Shares Pensions Property Pensions SSAS Loan
back Protecting Clients Scheme Pension Mary
Stewart - Marketing Director
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Shares Pensions
Many share portfolios have suffered significant
losses recently
The depressed value means that any CGT liability
attached to the portfolio should be minimal
Much of the losses incurred may be able to be
off-set by effective pensions planning
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Simon Parker, Surrey

• Company director, earning 120K
• On his IFAs advice, built share portfolio worth
  90K
• Recent market crash depressed value to 60K
• Simon keen to keep control of his shares but
  unhappy about the loss in value

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In-Specie Contribution of Shares
Shares Owned Personally (worth 60k)
HMRC
Basic rate tax relief paid on contribution
In-specie contribution paid net of tax

• Higher rate tax relief further 15K
• CGT bill on disposal was minimal
• Recovery in value CGT free
• Share dividends paid to the SIPP, keeping
  relevant income lt 150K

SIPP 60,000 Shares 15,000 Cash
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Philip Thomas, Birmingham

• Self employed shop owner. Income variable.
• Personal pension worth 50K
• Over last 20 years, built share portfolio worth
  50K
• Needed cash to buy stock but banks reluctant to
  lend

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Connected Party Sale of Shares
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Connected Party Sale of Shares
Existing Personal Pension 50,000
SIPP Bank Account 50,000
50,000 paid to Philip for the Shares
Bank
PHILIP sells shares to SIPP
The SIPP could borrow here if required.
Borrowings not restricted to property only!
Philips share portfolio worth 50K
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Connected Party Sale of Shares
SIPP 50,000 Share Portfolio
Philip got the 50K cash he needed for stock He
retained control of his shares As shares recover
in value, no CGT liability
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Property Pensions
Many businesses need a cash injection to expand,
diversify and survive
Lending is becoming more difficult to source,
and the cost is rising
Pension funds including Protected Rights - can
be used to buy commercial property
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Iain Stewart, Edinburgh

• Iain is 45 and a furniture restorer earning 65K
• He owned the workshop that his business trades
  from
• It is currently valued at 200,000 (no mortgage)
• Iain was concerned about how the property value
  could impact
• on his estate for inheritance tax (IHT) purposes
• He was also worried that he had no existing
  pension provision

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In-Specie Contribution of Property
Workshop 200,000 total
HMRC
Basic rate tax relief paid on contribution
In-specie contribution of 25 of the property
(50,000) paid net of tax
SIPP 50,000 Property 12,500 Cash
Year 2 100,000 Property, 25,000 Cash Year 3
150,000 Property, 37,500 Cash Year 4
200,000 Property, 50,000 Cash
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In-Specie Contribution of Property
SIPP 200,000 Property 50K Cash
Iain now has a pension! He has protected his
property from IHT On top of the 50K basic tax
relief, he has benefited from higher rate relief
as well
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Susan Powell, Leeds

• Susan owns a Veterinary practice and wanted to
  purchase commercial property for 300,000 for a
  new surgery
• Her existing pensions totalled 100,000
• (inc. 20,000 Protected Rights)
• Susans earnings were 80,000 p.a.
• The business had 75,000 available

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Joint Property Purchase
Existing Pension Scheme 100,000
Susan
40,000 net (50,000 gross) contribution
SIPP Bank Account 150,000
Property 300K
Bank
Company 75,000
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Joint Property Purchase
Existing Pension Scheme 100,000
Susan
40,000 net (50,000 gross) contribution
SIPP Bank Account 225,000
75 of Property Purchased for 225,000
Lends SIPP 75,000
75 of the Rental Value
Property 300K
Mortgage Repayments From the SIPP
Bank
Company 75,000
25 of Property Purchased for 75,000
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Group SIPP
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Loan back to sponsoring company
SSAS, not SIPP!

• Max 50 of net SSAS fund
• Secured by First Charge
• Max 5 years
• Base 1 interest minimum
• Capital Interest repayments

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Doubling Tax Relief
Company director had 50,000 in an existing
EPP. Company had 50,000 to invest in plant and
machinery.
50,000

• Get corporation tax relief on contribution and
  capital allowance for investment in plant and
  machinery.
• Protects the EPP benefits

SSAS
100,000 (inc EPP)
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Protecting Clients
How does the Financial Services Compensation
Scheme (FSCS) apply to SIPP clients? SIPPs should
be established in such a way that a clear audit
trail is available to demonstrate that each
individual SIPP is written independently of any
other. Co-Trusteeship Basic SIPP principles of
self investment suggest that the SIPP owner
should also be the co-owner of the SIPP assets.
Co-Signatory Co-Trustees should also have the
ability to be co-signatories on their pension
accounts.
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Protecting Clients
Can my pension help protect my other
assets? Assets held within a SIPP or SSAS are
separate to assets held personally or in the
members company. Eg. If a company sells its
commercial premises to the Directors SIPP, and
the business subsequently goes under, the
premises are protected from creditors Also,
funds held within a SIPP or SSAS are outside the
members estate for IHT purposes (on death pre
75).
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Scheme Pension

• Scheme Pension is simply an alternative way of
  taking benefits
• Previously available through a SSAS with a
  sponsoring employer
• Now available to individuals via the Hornbuckle
  Mitchell FIPP
• Pension calculated by an Actuary based on the
  individual

Allows much higher level of income to be taken in
certain circumstances, as not restricted by GAD
rates.
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10 year pre-determined Pension available at
outset
A pension will be paid for a pre-determined
term of ten years provided there are sufficient
funds to make the payments
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Scheme Pension Death Benefits

• Must provide a dependants pension (using Scheme
  Pension, USP, ASP, annuity)
• If Scheme Pension chosen
• Can be as high as deceased members pension
• Reviewable every 3 years
• Remaining installments on predetermined term paid
  to dependant (or if no dependant, anyone else of
  members choosing). Taxed as income
• Final option fund can be paid out minus 82 tax
  charge.

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Income Comparison Scheme Pension vs USP / ASP
Calculations are based upon GAD levels of 4.00
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Tips for Testing Times

• In-specie contribution of shares can tax relief
  turn poor investment performance into a good news
  story?
• Pensions property can pension funds be used
  to purchase property, so releasing equity and
  providing a cash boost for the business or
  individual?
• Dont forget SSAS! Loan backs are an excellent
  way to fund a clients company, benefiting both
  pension and business.
• Protection and peace of mind pensions can
  provide security and opportunity.
• Review income in light of low GAD rates now may
  be the time to act.

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The wider view.. ..of self invested pensions
Single Investment SIPP Full SIPP Group SIPP FIPP
(USP, ASP, Scheme Pension) SSAS
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• This presentation is intended for financial
  advisers only and is for information purposes
  only.
• It should therefore not be taken as advice.
• It is based on our understanding of current law
  and practice, which is subject to change.

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Contact Details
Midlands Richard Harley 07710 513727
richard.harley_at_hornbuckle.co.uk   London
Southern CountiesElaine Turtle 07957 253798
elaine.turtle_at_hornbuckle.co.ukGraham
Jack 07920 572040 graham.jack_at_hornbuckle.co.ukDo
ug Rae 07909 533346 doug.rae_at_hornbuckle.co.uk N
orth WestLisa Clague 07917 893533
lisa.clague_at_hornbuckle.co.uk Gareth Jones 07500
668467 gareth.jones_at_hornbuckle.co.uk   Scotland, 
Northern Ireland North EastBruce
Marsh 07803 043830 bruce.marsh_at_hornbuckle.co.uk H
oward Garnett 07500 668465 howard.garnett_at_hornbuc
kle.co.uk Steve Bertuzzi Commercial Director
07824 845125
steve.bertuzzi_at_hornbuckle.co.uk Stewart Dick
Senior Technical Consultant 07917 526480
stewart.dick_at_hornbuckle.co.uk