Unlike any other pension arrangement a Section 590 Scheme has mandatory approval from the Inland Revenue. However, the extent to which benefits may be provided is more restrictive than with their discretionary approved counterparts.
Section 590 Schemes have to date been the domain of Controlling Directors of investment companies who otherwise have very limited options for pension provision.
These arrangements have increased in popularity in recent years for individuals previously members of a SSAS because of there being total investment freedom eg. purchase residential property, make a loan to the member – investments that cannot be undertaken by a SSAS or any other tax exempt pension arrangement. There is also no compulsion for benefits to be used to purchase an annuity by age 75 unlike for a SSAS and most other pension arrangements.
Like a SSAS the member(s) will normally be a Trustee(s), however, there is no mandatory requirement to appoint a Pensioneer Trustee. Richard Pedro & Company would recommend that a Pensioneer Trustee is utilised as a Section 590 Scheme is administered in a similar way to a SSAS.
Richard Pedro & Company will prepare all paperwork to establish a Section 590 Scheme and will make arrangements for an actuarial report to be prepared on set up to confirm the contributions that may be made to the Scheme. All negotiations with the Inland Revenue to maintain the Scheme’s status as well as any subsequent wind up will be undertaken by Richard Pedro & Company on behalf of the Trustees.
- Tax exempt status – tax free growth on fund, tax relief on contributions paid, no tax on member in relation to contribution paid by the sponsoring employer.
- No investment restrictions (investments should be on commercial terms).
- Full control of fund by member(s).
- Flexibility in provision of benefits, contributions paid.