The Fiducia Master Retirement Account is not just a pension plan, but a highly flexible, tax effective, multi-faceted arrangement which enables clients to focus on the best way to fund their income and capital needs during their 60s, 70s, 80s and beyond. There have been some recent legislative changes which may well affect clients’ plans.
First, there have been some very welcome easements of the rules where pension arrangements are used to finance a commercial property purchase. Until recently, investors who had finance in place had been locked into the original deal because of certain arcane regulations.
These have now been lifted so, for example, it is possible to renegotiate loans on better terms. In a connected move, HMRC have recognised the changed economic times and now allow pension schemes to renegotiate leases to reflect lower rents even where the tenant is the members business.
A further easement will allow investors to move from one scheme administrator to another where existing finance is in place. Prior to this, pension schemes with finance had been locked in to the original scheme administrator.
These changes are the result of concerted pressure from professional firms on the Treasury and HMRC and are of significant benefit to SMEs in particular whose Directors and Managers have been adversely affected by the many recent changes in legislation.
On a similar theme, we have recently helped a client with cash flow problems in his business, who had already built up a sizeable retirement fund. Many people build up funds outside their businesses because it provides a contingency for the future should things go wrong with the business. Historically, the pension fund has been locked away until the businessman reaches retirement. It has always been possible to borrow money from a pension fund but it has to be secured – usually on a property.
In this case, our client had a retirement fund from which he could borrow, but did not have the property (already mortgaged) to offer as security. We were able to arrange a loan back to the client’s business, with the pension fund taking a legal charge over a combination of the business’s stock and debtors’ book.
Family Pensions are a further development. The concept of entire pension funds passing from generation to generation was too good to be true, but the latest breed of family pensions which are run on a similar basis to occupational schemes can be very attractive. Within a group (who don’t all have to be family members) pension funds can be arranged so that on the death of one member the accrued value of their fund benefits the remaining scheme members. At present, only a handful of pension plans are able to offer this facility, but the concept is obviously very attractive.
The new measures introduced by the government to prevent high earners from obtaining tax relief, not just on additional but possibly existing levels of recent contributions are extremely harsh. Anybody who is funding a pension and has earnings around or above £150,000 now needs very careful advice to ensure they don’t fall foul of these new rules and personal tax penalties. If in fact their tax relief is now limited, they should look at other tax efficient ways of funding for income and capital in later life. The Fiducia Master Retirement Account has the flexibility to provide solutions that a conventional Pension Plan is unable to do. Uniquely it provides a comprehensive suite of both the straightforward and sophisticated pension structures. But more than that, it also offers alternative, non pension facilities which offer complementary tax planning benefits.
Pensions are likely to be seen as an easy target for raising much needed revenue – whatever future government is in power. Tax relief on contributions is already being attacked, and it doesn’t take a genius to work out why the authorities no longer refer to the cash sum available at retirement as “tax free”.
The Fiducia Master Retirement Account can include all of these aspects of retirement planning (and many more). The point being that there is no one best way of making provision for retirement. We would argue that only by taking a holistic approach to planning for what happens in your 50s, 60s, 70s and beyond can one possibly hope to achieve financial objectives, especially in a period when we expect to see higher taxes all round in order to reduce the historically high national debt.
