Future of Pension Property and Self-Directed Funds

Written By: Zach Scannel
01 Nov 2024

Pension Planning

As a financial planner working closely with clients across Ireland, one of the most significant changes I’ve seen recently is the impact of IORPs II on Small Self-Administered Pension (SSAP) and Small Self-Administered Scheme (SSAS) structures. The introduction of this EU directive has reshaped the landscape of occupational pensions, making it clear that transitioning to a PRB(Personal Retirement Bond) or PRSA (Personal Retirement Savings Account) is not only inevitable but the smarter, more efficient choice for clients.

What’s Happening with SSAPs and SSASs?

Under IORPs II, the level of regulation and governance for SSAPs and SSASs has increased dramatically. This means stricter compliance requirements, higher costs, and greater administrative burdens for those managing these pension schemes. As a result, many providers have already stopped facilitating new SSAP/SSAS structures and are starting to mandate the transition to more streamlined alternatives, like PRBs and PRSAs. This trend is set to continue, meaning if you haven’t yet moved your pension, it’s likely you’ll be forced to do so by 2025.

Why PRSAs Make Sense

The PRSA is designed to be more cost-effective, flexible, and efficient. Here are some of the key reasons why moving your SSAP/SSAS to a PRSA makes good financial sense:

1. Lower Costs: The administrative burden and costs associated with SSAPs/SSASs are rising. PRSAs, on the other hand, come with lower management fees and fewer compliance requirements, saving you money in the long run.

2. Simplified Governance: PRSAs have fewer governance requirements compared to SSAP/SSAS, reducing the administrative headache that comes with navigating complex pension regulations.

3. Flexible Contributions: PRSAs allow for flexible contribution levels, making them ideal for individuals or business owners looking for more control over their retirement planning without being tied to rigid structures or employments. Essentially you can contribute into a PRSA right up to standard fund threshold of 2 million with no restrictions.

4. Provider Mandates: Many pension providers are already moving to phase out SSAP/SSAS offerings entirely. Waiting too long to make the transition means you risk being forced into a last-minute decision, potentially at less favorable terms.

Why Act Now?

With the regulatory changes driven by IORPs II and the inevitable shift in the industry, there’s no better time to take action. Transitioning your pension now to a PRSA or PRB will not only protect you from future headaches but will also save you both time and money as compliance costs continue to rise.

For many SSAP/SSAS holders, one of the biggest advantages has been the ability to hold property within their pension. However, under IORPs II, property ownership within these structures has become far more complex and costly to maintain. Increased scrutiny, different regulatory standards, and additional compliance costs mean that holding property within an SSAP/SSAS no longer makes sense.

While it’s still possible to hold property through a pension, the costs associated with maintaining it within an SSAP/SSAS will become prohibitive. PRSAs/PRBs offer a much simpler and more cost-effective solution.

In short, as SSAP/SSAS providers continue to phase out property ownership support, a move to a PRSA/PRB is not only inevitable but also the best financial decision for those looking to retain pension-backed property investments and still retain the ability to contribute to their scheme.

What About Property Ownership in Your SSAP/SSAS?

Retirement Bond Option

Another alternative for the SSAP/SSAS is to wind up and move the assets to a PRB(personal retirement bond). This precludes any additional contributions, but allows the same investment option as the PRSA, with the bonus of a salary and service calculation on retirement, and a flexible retirement date(from 50, as opposed to a PRSA which is 60).

Overseas Option

If you are worried about hitting the SFT(standard fund threshold). We can discuss the Malta/Gibraltar avenue.

Take Action Now

Navigating the complexities of pension changes can be overwhelming, but you don’t have to do it alone. If you have property within your SSAP/SSAS or are considering your next move, I can guide you through transitioning to a more efficient and cost-effective PRSA or PRB.

Book a consultation today to explore your options and ensure your pension remains robust and future-proof!

Reach out now for more details or to arrange a meeting.