Corporate Financial Investment
Case Study: Financial Planning for Company Directors
Four Directors of a PLC approached us as the Company Final Salary Scheme was about to go over to the Financial Assistance Scheme (FAS) as there were insufficient monies in the Scheme to maintain benefits.
We therefore compared the options of each of the Directors, with the benefits they could accrue with the Scheme as opposed to transferring those benefits into their own Self Invested Personal Pension Plan (SIPP).
In each case, it was agreed that they would be better off transferring the monies into their own SIPP with the monies therefore invested under the ASPL Wrap, using our Investment Process.
These transfers took place and the Directors now have their own SIPPs from which two of them are drawing an income and the other two do not need to use this capital for income purposes, and are therefore retaining the benefits untouched, as in the event of death they will be outside of their estate for inheritance tax purposes and this is therefore building up as an inheritance tax free arrangement.
This therefore gave each of the Directors control of their pension arrangements and the ability to draw on them as and when their overall financial situation required it.
NB. Whilst the Client names have been changed for Client privacy purposes, these case studies are actual ASPL Client case studies.
Directors
Most of our Clients are Company Directors that are still accumulating wealth or are about to enter the retirement phase of their lives.
Either way, we believe that our services are focused in this area as we have a great deal of experience here and enjoy working with business people.
Establishing Staff Pension/Staff Life Assurance or Keyman Schemes
Whilst we are often asked to provide advice in these areas, our focus remains primarily on the individual Company Directors’ affairs.
Company Investments
Businesses often accrue monies under deposit either because they are awaiting an investment opportunity or sometimes because they simply do not know what to do with it. There are a number of options open to businesses.
Investing company money that has built up within a business bank account poses a challenge to Company Directors. Whilst we are all familiar with Deposit Savings Accounts, rates of interest are particularly poor at the current time (2011/12) but nevertheless it pays to shop around.
For longer term investment, Corporate Investment Bonds are available although different tax rules apply depending upon your accounting basis: if the company operates on a “fair value” accounting basis, Corporate Tax will typically be due on any increase in the value of the Bond from one year to the next. Those companies that apply the “historic cost” basis will continue to benefit from tax deferral in respect of the Bond (this is because the original value of investment is normally shown on the balance sheet each year until the Bond is finally encashed). This historic cost basis therefore gives you tax planning advantages as you will be able to control the point at which tax is paid. Also you will be able to control cash flow by taking profits from the Bond in a year when overall profits are lower.
Pension Schemes
As opposed to paying contributions yourself as an individual, have the company invest the pension contributions on your behalf (making sure that you follow the “wholly and exclusively” HMRC rulings).
It is particularly useful to have the company pay the pension contributions when, for example, your salary is kept low because most of your remuneration is taken via dividends.
Again, this requires specialist advice and so please contact us.
Buying Premises via a Pension
Your old, frozen and current pension funds may be used to acquire commercial property. The idea is that the property ownership can be split between you personally and/or your business, and/or your pension funds. This therefore gives you a route to enable the purchase of the commercial premises you perhaps thought you could not afford. We could help you structure the deal so that your company ends up paying rent into your own pension fund. This is of course a complex area so please contact us for advice.
Cash Management and Investment
Businesses often accrue monies under deposit either because they are awaiting an investment opportunity or sometimes because they simply do not know what to do with it. There are a number of options open to businesses.
Investing company money that has built up within a business bank account poses a challenge to Company Directors. Whilst we are all familiar with Deposit Savings Accounts, rates of interest are particularly poor at the current time (2011/12) but nevertheless it pays to shop around.
For longer term investment, Corporate Investment Bonds are available although different tax rules apply depending upon your accounting basis: if the company operates on a “fair value” accounting basis, Corporate Tax will typically be due on any increase in the value of the Bond from one year to the next. Those companies that apply the “historic cost” basis will continue to benefit from tax deferral in respect of the Bond (this is because the original value of investment is normally shown on the balance sheet each year until the Bond is finally encashed). This historic cost basis therefore gives you tax planning advantages as you will be able to control the point at which tax is paid. Also you will be able to control cash flow by taking profits from the Bond in a year when overall profits are lower.
People
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Adrian is a Certified Financial Planner. He established Adrian Smith & Partners Ltd. in June 1999. His qualifications include Certified Financial Planner (CFP), Financial Planning Certificate (FPC), Advanced Financial Planning Certificate (AFPC), Securities Institute Foundation Certificate, Dip PFS.
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Ivan is a Certified Financial Planner and joined ASPL in 2003. His qualifications include: Certified Financial Planner (CFP), Advanced Financial Planning Certificate (AFPC), Financial Planning Certificate (FPC), G60 Pensions.
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