13 August 2008

A Group Self Invested Personal Pension (SIPP) can help senior employers satisfy their company’s shareholding requirements.

Watson Wyatt has pointed out that establishing a Group SIPP can be beneficial to companies who need their senior employees to demonstrate that their financial interests are aligned with the company’s performance, through the possession of enough shares.

Jackie Holmes, senior consultant at Watson Wyatt, explained: “A director who is required to own £100,000 worth of shares would effectively only need to find £60,000 to hold these through a SIPP. Once the shares are held within the SIPP, the dividends are not subject to income tax and, if the individual moves on, they can sell their shares within a SIPP without having to pay capital gains tax. The proceeds can then be reinvested to produce a more diversified, but still very tax-efficient, retirement fund.”

Holmes highlighted the importance of effective communication and individual impartial financial advice, which will minimise the fiscal risk for those near the Lifetime Allowance of making uninformed choices.

“In theory,” Holmes continued, “there is nothing to stop executives setting up SIPPs themselves. In practice, the thing that stops them in time. Shareholders have an interest in making it easy for executives to focus on the business’s financial affairs by helping them take care of their own.”

- Pensions Age August 2008