Small Self-Administered Pensions (SSAPS ) are pension plans that require the appointment of an independent trustee to ensure there is appropriate annual reporting and that the pension plan falls in line with regulatory standards.
They are the most expensive type of individual pension arrangement in terms of fees. Yet, they have been the preferred choice of many high-net-worth individuals and proprietary directors of private Irish companies up to recent times.
In the past, their main attraction (despite their high charges) was the fact they allowed the plan owners to invest directly in property, having related borrowings, as well as tax-free rental receipts as part of the arrangement.
Many SSAP owners it’s fair to say, also opted for this self-administered route for reasons of control in their choice of equity options and ETFs, but with that said, many still ended up sitting too long in cash, as they tried to time the market, or they simply didn’t perhaps have the time and knowledge, to impose sufficient asset diversification in managing risk.
However, since an EU Directive known as IORP II was transposed into Irish Law on 28 April 2021, SSAPS are now prevented from borrowing and significant additional obligations have been placed on the scheme trustees resulting in even higher charges.
This EU regulation also means that as we advance, SSAPs will need to be properly diversified and avoid “concentration risk”. Under the new laws, they cannot hold more than 50% of the scheme’s assets in property, although SSAPs which are one-member arrangements, do not have to comply with this rule until April 2026.
The IORP II Directive seeks to improve the way occupational pension funds are governed, enhance information transparency, and protect pension plan savers from a lack of asset diversity leading to excessive risk.
Existing SSAPs can continue until normal retirement age, but we would anticipate that the cost of meeting IORP II compliance requirements could be prohibitive, and individuals may then decide to wind up their SSAP and transfer existing assets to an Insured Pension arrangement, Self-invested Pension (SIPP) or Personal Retirement Bond (PRB).
You may also benefit from our article on: Self-invested Pensions vs Insured Pensions
Speak with a Financial Advisor
To arrange your free no no-obligation consultation by phone, video conference, or in-person contact us today. Contact: Ken O’Gorman – Director – QFA, CB, SIA – Pension Specialist – One Quote Financial Brokers on: 01 845 0049 or email: ken@onequote.ie
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