Key Post: Self Administered Pension Schemes

self controlled pensions

Aidan

I must plead some degree of ignorance on these geared property investments that are approved by the Revenue.

Maybe you are referring to companies that are set up to take on the property borrowing and the investor buys shares in that company. If so, surely this is not exclusive to self controlled schemes as I imagine a self directed can buy these shares in the same manner via a stockbroker.
 
self controlled pensions

Hi monet,

The manner in which gearing can be included in pension funds varies. In principle it involves an investment in shares or in unitised funds. The ability of the stockbroker to replicate this will depend on:
1. The underlying investment being within the investment mandate between the stockbroker and the wrapper provider
2.
 
self controlled pensions

Hi monet,

The manner in which gearing can be included in pension funds varies. In principle it involves an investment in shares or in unitised funds. The ability of the stockbroker to replicate this will depend on:
1. The underlying investment being within the investment mandate between the stockbroker and the wrapper provider
2. The investment being available to the stockbroker i.e. it may be of restricted circulation
3. The willingness of the stockbroker to facilitate this. (As a property based investment is unlikely to be traded often the ability of the stockbroker to earn trading fees is severely restricted)

I hope this comments are of use.

Regards,

Aidan
 
Gearing

Aidan, can you set one which invests in a private property company with gearing? Can the investor own shares in that company?
 
Above

Can you comment on the last post. It sounds very interesting
 
self controlled pensions

Apologies for the delay in replying.

"can you set one which invests in a private property company with gearing?"

Assuming the "one" referred to is a self controlled trust the answer is yes.

"Can the investor own shares in that company?"

I asume the question is whether an individual who is the principal beneficiary under a self controlled pension trust can also participate in a personal capacity in the same investment vehicle. In theory the answer is yes in that this is not specifically prohibited by the Revenue Commissioners. In practice such an arrangement would create significant practical difficulties. All Pension Schemes are entitled to the various tax reliefs applicable on the basis that the scheme is established for the "sole purpose" of providing relevant benefits. This "sole purpose" test is extremely wide and is the basis, for example, of the Revenue ban on the marketing of Pension Schemes and Pension mortgages jointly. In practice therefore, even if the investment is legitimate, it could be extremely difficult to establish this to the satisfaction of the Revenue. I believe this kind of situation is best avoided.

I trust this is of benefit.

Regards,

Aidan
 
Borrowing within a Self Admin Pension Scheme

Hi

A couple of quick questions regarding the recently approved ability to borrow within a Self Admin Pension Scheme, if I may:

- Whats the standard level of debt available for these ? ... best I've seen is 70% LTV on a property (with ability to generate income)

- What kind of costs are associated with the above, are the Banks charging you more, given it's non-recourse lending ?

- Whats the longest term you've seen a loan made available for ? ... over 20-years ?

- Is it possible to source a list of all the Revenue approved Pension Trustees & if so, can anyone tell me where please ?

Thanks

G>
 
SAPS

Hi, As you probably know by now, if the scheme is Revenue approved then it appears to be limited to a term of 15 years. No interest only loans. Details from the Revenue. Have you made any progress on these issues, which you can share, since your last post?
 
Time to bring this post back to life and update with some developments in the market for Self Administered Pensions.

By way of disclosure I can confirm that I personally have a Small Self-Administed Pension Scheme (SSAS).

In terms of eligibility, I am eligible to hold a SSAS as I am an employee (PAYE taxpayer) I am not a company director (although a company director is eligible, the self-employed are not). If you are an employee, it should be noted that it is necessary to obtain the consent of one's employer to sponsor the pension scheme.

Flexibility
The SSAS allows me to have a considerably more flexible pension than either a PRSA or a personal pension from an Insurance Company.

One of the reasons for this is the access to an un-fettered range of investment options. By this I mean that I am able to invest in any asset class permitted by the Revenue without any restrictions being imposed by an Insurance Company.

For example, it is a little known fact that although the Revenue will allow investment into commodities within Irish pension funds, it may not be possible to hold these within all forms of pension. The problem arises from the way in which insurance companies are supervised and regulated, specifically, the European Communities (Life Assurance) Framework Regulations 1994. These regulations specifically prohibit an Insurance Company from investing in commodities.

Where a pension is structured as a trust (such as in a SSAS), this restriction does not apply thereby offering greater investment choice.

Costs
There are certain fixed costs associated with operating a SSAS and having a pension trustee. I pay a little over €1000pa. This would be equivalent to a 1% annual charge on a €100,000 pension fund.

It is therefore reasonable to conclude that the charges for a SSAS are probably uneconomical for a pension fund of less than €100,000 compared to an insured pension product.

Stockbrokers
Like many AAM readers, I had a look at all the established Irish Stockbrokers, laughed heartily and proceeded to apply the wonderful power for good that is global competition.

The recent Markets in Financial Instruments Directive (MiFID) now allows stockbrokers to "passport" their services across the EU from one country to another.

The key here is to not only find a low cost broker internationally, but also one who can operate within a pension trust.

I have therefore opened an account with a major online broker offering trading in multiple currencies and on multiple exchanges for a fixed-fee per trade rather than the more normal percentage per transaction.

Investment advice
There is a misconception that a self-administered pension means there is no role for an adviser. Recent experience has shown that this is simply not the case and the need for competent financial advice is possibly greater than ever.

In my experience an accountant will have typically done a very good job of selling the tax benefits of setting up a SSAS. However, most of the schemes that I review are sat with large cash deposits and the member simply has no idea how to invest this cash.

In the past, where cash has been invested, the "traditional" route seems to have been to either seek out the services of a stockbroker or to make an investment into property. Clearly recent events have shown that both of these options are not without their risks.

With the Irish Stockmarket now making up just 0.22% of the World (source: MSCI World Index end Sept 2008) the folly of buying a small basket of Irish Companies as a safe, blue chip or in any sense diversified portfolio has now been exposed for the madness that it always was.

Furthermore, the credibility of the advisers who sold such highly concentrated positions in such a small range of stocks and mislabled this as a "portfolio"" has clearly been heavily damaged.

Equally, the frenzy of property speculation has left many with ill-conceived investments which may be highly leveraged, concentrated and illiquid.

The key to good financial advice in my opinion is simply the absence of the need to make a forecast about the future.

If I see "advice" which contains words such as "I feel, I believe or I think" I know that there is a hope of a result - I would consider anything along these lines to tend to be speculation about the future.

By contrast, investment advice is based upon an expectation of a result. E.g I expect an investment in the stockmarket to be more risky than an investment in government bonds. I therefore expect a higher return over time as compensation for the higher risk.

The foundation of Modern Portfolio Theory was a 1952 paper, "Portfolio Selection" by Dr Harry Markowitz in which he established a theory explaining the best way for an investor to choose a portfolio. Modern Portfolio Theory is of such fundamental importance in investing that the economists that formulated the theory received the Nobel Prize in Economic Science in 1990.

Modern Portfolio Theory has four basic premises:

  • Investors are inherently risk averse. Investors are more concerned with risk than they are with reward. This sets them apart from speculators.
  • Securities markets are efficient. Most studies support this idea.
  • The focus of attention should be shifted away from individual securities analysis to consideration of a portfolio as a whole, predicated on the explicit risk/reward parameters and on the total portfolio objectives. The efficient allocation of capital in a portfolio to specific asset classes is far more important than selecting the individual investments.
  • For every risk level, there is an optimal combination of asset classes that will maximise returns. Portfolio diversification is not so much a function of how many individual stocks or bonds are involved, as it is of the relationship of each asset to each other asset.
Competent Asset allocation within a pension therefore involves dividing the investment portfolio among different asset categories such as equities, fixed interest, cash and property and the process of establishing which mix of assets to use, is largely determined by investment objectives, time horizon and tolerance to risk.

The rationale for asset class investing is simple: capital markets work and diversification between asset classes increases return and reduces risk. Over the long run, markets reward investors with positive returns for taking risks and providing capital. If they did not, the capitalist system would have collapsed long ago. Market prices reflect the knowledge and expectations of all investors. Nearly forty years of academic research has shown that traditional fund managers are unable to outperform the markets by anything more that we would expect by chance.


"The idea that any single individual without extra information or extra market power can beat the market is extraordinarily unlikely. Yet the market is full of people who think they can do it and full of other people who believe them….Why do people believe they can do the impossible? And why do other people believe them?
Daniel H Kahnemann, 2002 Nobel Laureate in Economics.
 
Hi Marc and All,

First post. Please be gentle!

The cost of Irish Stock Brokers are ridiculously high. Does anyone have any more information on the "Markets in Financial Instruments Directive (MiFID) and passport services" available? Which foreign stock brokers can do this? In particular for an SSAP?

I am hoping to do this for my SSAP hence need the stock broker to recognise what an SSAP is and treat dividend withholding tax correctly etc. I am guessing anyone doing this will have to have an Independant Trust Company who is comfortable with it. I already have my SSAP set-up and my Independant Trust Company but I haven't done anything yet as the cost of Irish Stock Brokers is so high.

Does anyone know of any international stock brokers who can do what Marc is talking about? Would any UK Stock brokers who do SSIP be an option?

Could this as simple as setting up an SSIP with a UK based Stock Broker for example see Interactive Brokers? I cannot post link yet (less than 15 posts) but put www in front of this interactivebrokers.com/en/accounts/individuals/sippAccount.php

One problem I see with this is that IB state you must be UK resident for this? Would the MiFID regulations take care of that?

Or SSIP with TDWaterHouse ?

tdwaterhouse.co.uk/typesofaccount/sipp.cfm

Best Regards,

Kevin.
 
Last edited:
Can't answer the "best value" question, but I think there are only a couple of firms offering this service, so it shouldn't be too difficult to make the comparison yourself.

As to the US mutual funds, in general a non-"US person" cannot, for US legal reasons, invest in a US mutual fund. You can, however, invest in exchange-traded funds, which are similar though not identical. I have no idea what an "inverse index fund" is, so I can't tell you if there's an exchange-traded alternative in which you could invest.

I don't know where you got the idea that a non-US person cannot invest in US mutual funds. There is no rule in US law about that. It would be impossible to administer. Consider an ex-pat temporailiy living in the US, and he gets himself a US broikerage account or IRA and invests in mutual funds. He then returns home. If there was such a law, you are saying he would be forced to liquidate. But this is not so, because I have sebveral colleagues who have been in that situation.

You may have to open a US brokerage account, and to do that, you will need either a US social security number or a US taxpayer ID. You can get a US taxpayer ID online. When the US mutual fund makes a distribution, if you are not US resident, a US tax will be deducted at a rate that depends on what it says in the bilateral tax treaty between the US and your home country. This tax is allowed as tax credit against any tax due in your home country. So the problem is, if you want to own the US mutual fund in a tax-deferred pension account, the US tax will still be paid, and you may not be able to claim a credit for it in your home country. There is a solution however: You sell the fund just before it makes the distribution, and buy it back the day after, as it will have fallen in price by the amount of the distribution. That way you end up with the same number of units, plus cash more or less equal to the distribution, but without the tax issues.

You just need to have a brokerage account that is able or willing to hold such an investment. It
 
Help re MiFID's

Hi Marc /All

While surfing for info re Irish trustees and on line brokers I came across your post and your point re MiFID.

I have been trading my non pension funds with a very good US based on line broker for 7+ years now, however they do not/can not offer facilities to non US based private pension fund owners (ie SASS/P's) even if the Irish trustee sanctioned them.

Any Irish trustee company I have spoken to date all offer only one company. Yes, they all offer the SAME one . This broker has offices based in London and elsewhere, however their primary focus from their website would seem to be FOREX. Their offering with general equity trading seems quite basic as they have a note in their small print that Option trading is "Coming Soon". There pricing for trades is in US dollars approx $10 per trade which is not great (I pay $5 no stock limit) There is no mention of their UK/Ireland pricing structure. So I am concerned if they are really focused on their stock trading clients. In addition, they only offer the standard UK guarantee which is approx £50K(sterling) if they go out of business

So I am really looking around for any other options out there . Can you Help please.
TIA
 
Online Broker for Self Administered Pension Scheme

Hi Marc & all,

I have a Small Self Administered Pension Scheme (SSAPS). Does anyone know of an online direct access broker that will allow me to open an account for the pension fund (or trust fund) so that I can invest some of the fund directly?

Marc - you stated in one of your earlier posts that...
"I have therefore opened an account with a major online broker offering trading in multiple currencies and on multiple exchanges for a fixed-fee per trade rather than the more normal percentage per transaction."

Can you name the broker? (I will send you my contact details if you cannot/do not want to name them on this forum.)

Thanks all.
 
Online Broker for Self Administered Pension Scheme

Hi Marc & all,

I have a Small Self Administered Pension Scheme (SSAPS). Does anyone know of an online direct access broker that will allow me to open an account for the pension fund (or trust fund) so that I can invest some of the fund directly?

Marc - you stated in one of your earlier posts that...
"I have therefore opened an account with a major online broker offering trading in multiple currencies and on multiple exchanges for a fixed-fee per trade rather than the more normal percentage per transaction."

Can you name the broker? (I will send you my contact details if you cannot/do not want to name them on this forum.)

Thanks all.

Hi Marc & all

I have the same query as DecQ above(22 aug 2012).

I will send you my contact details if necessary.
thanks,vesuvius
 
Hi Marc,

You mentioned in an earlier post
"I have therefore opened an account with a major online broker offering trading in multiple currencies and on multiple exchanges for a fixed-fee per trade".
and
"I pay a little over €1000pa" in trustee fees.

Would you mind letting me know the name of this broker and trustee please?

I cannot find any reasonably priced broker that recognises my SSAS trust?

I will perform my own due diligence and won’t consider this advice in any form.
You can send me a PM if you do not wish to reply here.

Thanks
 
Hi Marc,

You mentioned in an earlier post
"I have therefore opened an account with a major online broker offering trading in multiple currencies and on multiple exchanges for a fixed-fee per trade".
and
"I pay a little over €1000pa" in trustee fees.

Would you mind letting me know the name of this broker and trustee please?

I cannot find any reasonably priced broker that recognises my SSAS trust?

I will perform my own due diligence and won’t consider this advice in any form.
You can send me a PM if you do not wish to reply here.

Thanks
Hi,
I have the same query for a €1M executive pension pot that I am looking to see if I can lower the Trustee and AMC. Can anyone provide information on the above?
Thanks in advance!
 
Hi,
I have the same query for a €1M executive pension pot that I am looking to see if I can lower the Trustee and AMC. Can anyone provide information on the above?
Thanks in advance!

Is it possible to find out who is providing Trustee services for €1,000 total or €1k+vat like Marc mentioned above? I am currently paying 1750 + vat for my SSAP and I'm 38 so plenty of years left till retirement and I'm always looking to tidy up our numbers
 
This tread is from at least 2012.

regulation has significantly increased pension costs in Ireland in recent years.
The best pricing for an exec pension in Ireland is now around 0.40% wholesale plus the cost of an adviser to administer the scheme.

it may be possible in some instances to move the pension to another EU country and my pension trustees charge a flat fee of €2,000 to €3000pa depending on the size of the pension fund so it is still possible to reduce costs here.


Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie
 
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