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Mr M Mehta
Kearsley Airways Limited
Temple Gardens
Barnet
London
NW11 0LL

FAX: 0208 458 7299						            15 October 2007 

Dear Mr Mehta,

SSAS & SIPPS – Death Benefits

Further to our meeting last Wednesday, as requested, I have summarised the key points which we discussed by way of a record. 

Retirement Benefits

By age 75 you must take your cash lump sum and commence drawdown of your pension. As an alternative to an annuity, you may take pension as alternative secured pension. Under this option, the minimum you may draw down is 55% of the “certified” amount. The maximum is 90% of that certified amount. The certified amount is broadly equal to 100% of the equivalent pension that would have been secured had you purchased an annuity. 

Under a SSAS, in addition to an alternative secured pension, you may elect for a pension to be paid as “scheme pension”. Under scheme pension, the income is equal to 100% of the certified amount. This option may allow greater sums to be drawn over alternative secured pension. A SIPP does not provide a scheme pension option. 

Death Benefits

The death benefits under a SIPP and SSAS are broadly equal (with the exception of scheme pension which is available through a SSAS only). The crucial difference in my mind comes to the practical issue of distribution of death benefits. Under a SIPP, the Administrator is invariably the SIPP Trustee Company. Under a SSAS, you, Mrs Mehta and others that you nominate may be the Administrator. 

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I illustrated at our meeting (by quoting directly from HMRC’s manual) how a dependant is defined:

It is a person who was married to …the member at the date of the member’s death is a dependant of the member. A child of the member is a dependant of the member if the child has 
•	not reached the age of 23, or 
•	has reached age 23 and, in the opinion of the scheme administrator, was at the date of the member’s death dependent on the member because of physical or mental impairment……..
By applying the letter of the law as it stands, the entire fund on the final death of you and Mrs Mehta must be used to benefit your son as an income. On his eventual death, the funds could be paid to the Romeera Foundation. This applies to both SIPP and SSAS. 

The administration and payment of this will vest with the SIPP Administrator, who is a third party. Under a SSAS, the Administrator can be person(s) connected to you and as such could be from your “circle”. You may therefore feel that having persons connected to you would ensure that there is a more flexible application of these payments, the amounts paid and the timing of those payments. 

Dis-advantages of transferring from SIPPS

The disadvantage in transferring is one of cost. You are required to have unaudited scheme accounts, you will have to pay for the cost of setting up a new SSAS and there is also the only going annual administration fees associated with this. 

The cost for the transfers, re-registration of property to the SSAS, set up of the new scheme, plus first year’s annual administration will be in the region of £2,200-£2,800. After these costs, the annual administration cost for a SSAS is slightly cheaper than operating two SIPPS, although the requirement to produce annual accounts remain. 

Investment choice

Under a SSAS the investment choice vests solely with you and the other trustees of your scheme. Under a SIPP, the investment choice is laid down by the SIPP Trustee Company, who will also be party to any transactions undertake on the scheme. They may not consent to direct investments in India or Dubai given that they are co-trustees. I understand that you have clarified this point with Barnett Waddingham Trustees Limited. 

Trustees & Administrator

It was recommended by your accountant that a Trustee Company is created, this will allow the scheme to continue on death of the final member on a easier footing. There is no reason why that Company cannot be a trustee of the scheme now. 

We fulfil the role of scheme practitioner. Our responsibility is to carry out all administrative functions imposed on the scheme administrator. In particular, the scheme’s tax returns and annual event returns. We carry this out on-line and your scheme will be registered on-line which will give you instant access to the work we carry out for you. This forms part of our annual administration service. 

The advice I have given to you over the last 10 months has sought to balance out your current and future needs, I have no doubt that you will enjoy the additional flexibility of being in sole control of your investments and banking, hopefully Mrs Mehta is happy with the plans put in place to use this scheme to look after your family in the long years ahead. 

I trust that this summarises the key differences which we discussed, if you wish to proceed with this please let me know and we will arrange for the various Deeds to be drafted for you. Please also confirm to me the name of the scheme. I will need to discuss with you separately the best way to tackle the sensitive matter of Barnett Waddingham, as they will no longer be administering your SIPPS. 

Kind regards

Yours sincerely

Gavin McCloskey
For Pension Practitioner .Com