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The Legal Structures of Pension Schemes

There are 3 types of legal structure;

  1. Trust based Personal schemes Established under a trust deed. Run subject to trust deed and rules. Trust company established to implement oversight and compliance. Lots of work and responsibility for trustees.
    Trust based Group schemes
     Trust based Occupational schemes are established by the employer and managed by trustees. These arrangements allow a return of contributions (the other legal structures below offer very limited return of contributions options due to law).
  2. Contract based Personal schemes Individual contracts between the provider and member. These schemes are established by a deed poll (however in practise they refer to a trust deed and rules). The provider is the scheme administrator and there are no trustees. The distribution of death benefits must be discretionary to avoid inheritance tax as a registered pension scheme is 'settled property’ according to law. To avoid this the trust deed and rules will appoint trustees or the scheme administrator as having the discretion, therefore providing the exemption to Inheritance Tax.
    Contract based Group schemes are a contract between provider and employer. Employer’s only responsibility is to contribute. No investment decisions are made by employer.
  3. Master trusts Single trust arrangement for multiple group schemes. Subject to same trust deed and rules. Trustees normally appointed by the provider.
IF YOU NEED INVESTMENT ADVICE PLEASE CONTACT AUTHOR Elliott Wilson ACSI DipPFS AF3

While we keep information on the website as up to date and as accurate as possible, the information on this website does not form part of our advice process. Cambridge Pensions Ltd cannot accept any liability for any decisions made by a client or member of the general public based on any information contained on this website. The value of your investments can go down as well as up and you may get back less than has been paid in.

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