AI reccomended areas

Question 1

self investment

Answer 1

• SIPPs offer the most investment choices
• they allow people to invest in property but can’t be residential

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Question 2

limits on investment in sponsoring schemes

Answer 2

• the total value of shareholding in the sponsoring employer than an occupational scheme ie SIPP or SSAS is limited to
• under 5% of the scheme assets in one sponsoring employer
• under 20% of the scheme assets in a scenario that relates to more than one sponsoring employer.
• the value is calculated at the tkme the scheme purchases the shares
• in theory a registered pension scheme could own 100% of the share capital provided its within the 5-20% rules
• A SSAS and a trust based SIPP are subject the to the lending limits. A contract based is not as it’s not an occupational one

Question 3

Loans to sponsoring employers

Answer 3

• must be from a SSAS or a SIPP under individual trust - oc. A contracted based SIPP isn’t occupational
• also they need to make sure they do not exceed 50% of net value (after all borrowing taken off)
• must be secured for loans and interst
• interest is calculated as the base rate of the six main clearing banks with 1 % added and rounded to a multiple of 0.25% - always round up so if it’s 0.26% or needs to be 0.5
• not be more than 5 years unless it’s the same loan and the employer is struggling to pay it - can only be another 5 though
• subsequent falls in the value are ok as long as they are not the fault of the employer.
• must be repaid by equal annual instalments of capital and interest

Question 4

borrowing by a pension scheme

Answer 4

• Both SIPPs and Contract and trust based can borrow 50% of assets. If they already have borrowing this is taken again off the end amount

ie £270,000.00 asset being purchased and there is a £200,00.00 fund. You would do £200,000.00 x 50% is £100,000.00. the fund value if £200,000.00 and can be used as an amount so would have £300,000.00

• if the scheme had already borrowed £30,000.00 calculate the amount.

£200,000.00 - £30,000 x 50% which is £85,000.00. Then you take the £30,000.00 again to make £55,000.00 which would be less than the desired amount.

• make sure you take the figure twice
• the definition allows people in drawdown to loan the full 50% of the pension.