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PaulS's picture

How to save your pension

Back in 2005, prior to purchasing our farm, I have published this article, which is still very relevant to anyone with a pension plan (and btw since then stock market has collapsed by 30% and agri land has doubled in value):
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I have investigated the situation over the past six months and have 'rescued' my pension. I mean I now have access to the cash and can invest it as I wish, rather than relying on a stockbroker in a pension company (And you know the definition of a stockbroker - its the guy who looks after your money, until its all gone)

Pension schemes are very long term financial investment. These make sense in times of steady growth, not in times of extreme uncertainty AND the possibility of a stock market collapse!.

If you have a pension, you CAN get your money out and you CAN use it the way you want to. Everybody with a pension has the right to transfer the current value out of their existing pension scheme into a new pension scheme. And that includes the money contributed by your employer, as well as your own contributions.

There are two special pension schemes, in which you are the guy deciding what to do with the money, which still has to be invested, rather than spent, but it could buy you a plot of land, piece of a wood, property (hmm, too expensive), bullion (as much or as little as you like), oil company shares, oil futures, a business, may be a workshop, etc, etc.

These pensions are known as SiPS (Self-invested Pension Scheme) and SSAPS (or SSAS) (Small Self Administered Pension Scheme).
SiPS is for individuals, SSAPS for companies.

SSAPS cost some £1,200 to set up and some £500 per year in charges (because by law you must have a 'pensioneer trustee' and produce annual accounts). SiPS are probably cheaper.

Once set up, you can transfer the 'transfer value' of your current pension scheme(s) into your own, except for so called 'protected rights', which is he money that the Government has paid in for you (SERPS for example).

This is exactly what I have done and I am about to invest most of the money in agricultural land.

How do you make it pay?

For say £30,000 you can buy a field of about 10 acres (5 acres in 2008), that is your SiPS buys it. Your SiPS then rents it to a grateful farmer (farmers are keen to do that, so no problem) who pays about £70 per acre per year. That's £700 income, less the charges and your pension has grown by £200 in a year. Not much, but at least its not reducing on the stock market out of your control, and of course a) it will be worth a lot more in the future and b) you could get into small scale farming yourself now or later.

SSAPS are trusts, which can be shared between as many people as you like, each retaining their fenced in part of the total. So even small amounts can be pooled and made to work. To make sense, given the charges, you need at least £20,000 in the Sips or SSAPS.

I am happy to answer any questions as far as I can, not being a professional in the field.