John Ellis

Your Money & You

John Ellis Setting up a one-man pension scheme

Have you what is called or are in the process of setting up a ‘one-man pension scheme’? A OMS is an executive pension plan with only one or two persons in the scheme. e OMS is di erent from a PRSA or a personal pension as it is set up in trust on behalf of the employee who is usually a director of their own Companies..

If you have, the recent Pensions Authority announcement needs to be seriously evaluated as signi cant changes have been made which will a ect you and your pension. Two of the main amendments include deletion of the exemption for one-member arrangements in respect of annual reports and deletion of the alternative annual report option for small DB or DC schemes,

As a result of these changes, your One-Man Scheme will now be required to produce a full Annual Report as well as Audited Accounts (which was only a requirement for 100+ members schemes!) and there will be a signi cant cost to the fund which could cause it to be untenable.

Due to these implications all pension providers have taken the decision to cease accepting new applications for these plans with immediate e ect. For existing plans, they will continue to monitor regulatory developments and update Financial Advisors on an ongoing basis, into current plans you may continue to invest new contributions and top-ups. Corporate Business (Group Scheme) is una ected by this announcement.

So, what are your options? If you have recently proposed for an OMS you can continue but your nancial advisor will need to sign a declaration to say they have spoken to you and outlined the rational and costs to proceed. You need to con rm you understand the issue and are prepared to pay the cost of the annual report and audited accounts.

I contacted one provider, and they have declarations ready for signing but when asked the cost of the new service they could not give a gure! So be careful, sign nothing, agree to nothing until you know what you are agreeing to. Wait until there is greater clarity on fees etc.

If you don’t wish to wait you could take the Personal Retirement Savings Account route. It may be a viable alternative for many but not for all, especially not if you wish to make substantial contributions for tax purposes. Under the PRSA facility contribution limits are xed and combine employer and employee contributions when calculating contributions for tax relief.

Here is a worked example. An employee aged 35 on a salary of €55,000 a year wishes to contribute €300 a month (EE) to his PRSA or €3,600 annually. His employer has agreed to contribution an additional € 833.33 a month (ER) on his behalf. e total contribution is deemed to be €13,600 (EE + ER) for the PRSA plan.

Here’s the nub, which was not an issue under the old OMS, the total combined contributions cannot exceed his age-related percentage of salary, ie. at his age 35 he is in the age band – aged 30 to 39 therefore the maximum that can be invested is 20% of his salary - €11,000.

Since the proposed contribution is to be €13,600 he is exceeding his age limit contribution by €2,600. is will incur to him a BIK tax bill at the marginal rate of 40% of €1,040. e employer is also penalised in that they are not allowed to claim tax relief on company contributions.

You could appoint a professional trustee company or become your own trustee but this opens up all manner of problems as according to the Pension Authority “a person shall not act as trustee of a scheme or trust RAC unless the person has the quali cations and knowledge which, together with the quali cations and knowledge of the other trustees, are collectively adequate to enable all the trustees of the scheme or trust RAC to ensure the sound and prudent management of that scheme or trust RAC”. e way forward is the ‘Master Trust’. e key bene t of a master trust arrangement is that all trustee duties are carried out by a registered trustee company. erefore, you will not need to appoint your own trustee board to manage the associated governance and compliance requirements as scheme governance is managed the Master Trust.

Next week we will look under the bonnet of the Master Trust.

“The way forward is the Master Trust...

john@ellis nancial.ie 086 8362633.

Rural homeowners in Kilkenny bene t from €628,000 plus upgraded laneways and non-public roads

Funding for the Local Improvement Scheme has been doubled to €22 million as part of Our Rural Future, the Government’s ambitious policy for rural development, Fine Gael TD, John Paul Phelan, has con rmed.

Deputy Phelan welcomed the news from the Minister for Rural and Community Development, Heather Humphreys TD, that Kilkenny will see a major increase in our allocation under the Local Improvement Scheme for 2022.

Deputy Phelan said: “ is extremely positive announcement will see our laneways and non-public roads in Kilkenny receive improved access to homes, farms and outdoor amenities.

“Prior to this news, Kilkenny Local Authority consulted with local residents and landowners to identify road and laneway projects where works could start immediately and be completed this year.

“Fine Gael is working to build stronger, safer communities and we want to see more people living, working and raising a family in our rural communities throughout the country. We will continue to ght for rural homeowners in Kilkenny and make the case for further increases in funding.

“ e funding provided by the Department will be complemented by a local nancial contribution from landowners/households. ere is a ers/households. ere is a ceiling of €1,200 on the ceiling of €1,200 on the amount that any indi-amount that any individual householder or vidual householder or landowner will be asked landowner will be asked to contribute towards to contribute towards the cost.

Minister Heather Minister Heather Humphreys added, Humphreys added, “ e scheme provides “ e scheme provides substantial grant aid substantial grant aid for the upgrade of these for the upgrade of these routes and assists home-routes and assists homeowners with the costs. In owners with the costs. In many cases where many cases where there are multiple homes on a lane, neighbours will work together to draw down funding under the scheme.

“ e Department of Rural and Community Development is now exactly ve years old. I am proud during those ve years my Department has provided over €100 million under the Local Improvement Scheme. at funding has delivered improvements on over 3,000 roads and laneways nationwide bene tting over 13,000 rural homes. 13,000 rural homes. e funding I am e funding I am announcing announcing today will see today will see a further in-a further increase in those crease in those numbers with numbers with many more many more homeown-homeowners bene t-ers bene tting”, Minister ting”, Minister Humphreys Humphreys concluded. concluded.