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Self Invested Personal Pension

A Self-Invested Personal Pension is a structured product that allows the client a more bespoke investment strategy than is available with the traditional personal pension structure. Traditionally, most pension plans are invested in managed funds which pool investor’s monies and invest in shares, property, bonds and cash. Self-Invested Pension Plans are becoming more popular for clients who want much more flexibility and control over the assets in which their pension fund can invest.

Self-Invested Pension structures allow the client to invest in various assets classed of their choice such as, for example, property, shares, commodities, bonds or deposit accounts. Lending for a property purchase within the fund can also be facilitated. There are some restrictions on the types of investments that the fund can make, specifically:

  1. Self investing is not allowed – investments have to be at arm’s length, so, for example, a holder can’t use the pension fund to purchase a property for their own use. However, the fund can purchase an investment property which can be rented (tax free) to an unrelated party.
  2. Investing in pride in possession articles is prohibited such as vintage cars or fine wines.

A portion of the fund may be taken as a tax free lump sum at retirement.

Tax Relief/Net Relevant Earnings

Holders of these plans can receive full income tax relief at their marginal tax rate on their pension contributions based on current legislation (there are proposals to change this but it is not yet clear if such proposals will come into practice). However, there are limits to the amount of tax relief that can be claimed. As highlighted below, these limits are influenced by the individual’s age and is a percentage of their net relevant earnings, up to an “earnings ceiling” of €115,000. The holder is entitled to pay their pension contributions monthly or annually by direct debit or can pay a “once-off” contribution, e.g. at the end of the tax year depending on their taxable earnings.

Age % of relevant earnings eligible for tax relief

Under 30 years

15%

30 – 39 years

20%

40 – 49 years

25%

50 – 54 years

30%

55 – 59 years

35%

60 years and over

40%