While most people are familiar with workplace schemes or personal pension plans there is another type that
is slightly more exotic and has tended to be the preserve of owner-directors of companies and other high net worth individuals – small, self- administered pension schemes (SSAPS).
In such a scheme the member decides the investment strategy and chooses the funds, equities and other instruments in which he or she wishes to invest.
The schemes have to set up under a legal trust and approved by the Revenue Commissioners, with the investment under the direct control of the members or trustees.
This usually entails higher administration and other costs than those associated with workplace or other standard schemes.
"Control has always been the key attraction of self-administered pension schemes", says Andy Kelly of Invesco pension consultants. "Members of these schemes enjoy levels of control and involvement which cannot be matched by any other pension plan.
“When we are advising a client we look at their risk profile and we look at the assets they are already invested in and then we advise them on their options for their pension.
“They might be interested in equities or absolute return funds and we will work with them in a collaborative process to select a portfolio that meets their needs and will offer the prospect of reasonable returns.”
Davy pension and financial planning consultant Peter Feighan points to the popularity of these schemes. "It is fair to say that they are becoming more popular now with the upturn [but] they were a very attractive vehicle all along, even during the downturn.
“People want to exercise more control over the management of their pension assets and the statistics show that around half a million schemes of this nature are now in existence.”
Like Kelly, he stresses the need for people with such schemes to take investment advice and points to past mistakes in this regard.
“Some people used these structures to invest in one asset or one asset class and didn’t fare well as a result of the economic conditions. You need to have a good mix and spread of assets,” he says.
Munro O’Dwyer of PwC sounds a note of caution, however: “An SSAPS is just a fancy defined contribution scheme with a bit more control over the investments and it costs you a bit more to have that control.
“We are probably now in a period where growth expectations for all asset classes are going to be quite low but the costs of these schemes are still at 2008 levels when expectations were much higher.”