Small Self Administered Pension Schemes (SSAPS)
A Small Self-Administered Pension Scheme (SSAPS) is an approved company sponsored pension arrangement, where the member trustee (Client) decides how the funds are invested. In general, investments are made outside of insurance companies. The vast majority of SSAPS are established in respect of company directors or key employees.
By establishing an SSAPS the member retains control of the funds and investment decisions in his/her own scheme. The Revenue Commissioners require that a Pensioneer Trustee, such as Newcourt Pensioneer Trustees Ltd, be appointed to operate all such schemes.
How does it work?
Contributions made by the employer into an SSAPS can usually be offset against Corporation Tax as an allowable business expense (subject to Revenue limits). We offer considerable flexibility in relation to the timing of an employer’s contributions to the scheme. The employer can choose to make regular contributions to the scheme and / or lump sum payments to tie in with the employer’s company tax year end. You can also benefit from tax relief on any personal contributions made. Tax relief is normally available at your marginal rate of tax up to a maximum of 40% of earnings each year, depending on your age and the earnings cap. This reduces the net cost of your pension contributions considerably.
In terms of investment, an SSAPS offers you the opportunity to manage your retirement fund without the investment restrictions found with many traditional Life Company contracts. You can make your own investment decisions and retain control of your retirement fund. Under current Revenue rules, the investment growth generated by the SSAPS investments is exempt from income tax and capital gains tax.
On retirement, you can take 25% of the pension fund as a retirement lump sum. Up to €200,000 of this is tax free (this is the total of all lump sums taken from all of your pension plans since December 2005) with the balance up to €500,000 taxed at 20%. You can use the remainder of your retirement fund to invest in an Approved (Minimum) Retirement Fund. An alternative option is to receive up to 1.5 times your final salary as a retirement lump sum. Lesser multiples apply where you have less than 20 years service with the employer and/or where you retire earlier than your normal retirement age. If you avail of the 1.5 times salary option then you must use the balance of your retirement fund to purchase an annuity (fixed income for life).
There is a limit on the maximum fund that can be built up on retirement. This is currently €2,000,000. This figure includes all of your pension funds, including the capital value of any retirement benefits drawn down since 7 December 2005. Where the relevant limit is exceeded, the excess of your pension fund at retirement will be liable to a once off Income Tax charge at the higher rate of tax. In the event of your untimely death a lump sum of up to 4 times salary, plus a refund of your personal contributions can be paid to your estate tax free.
An annual income for dependants will be purchased with any surplus monies in the fund.