These small pension schemes may soon be a thing of the past – don’t bet your future on them

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An EU directive is causing sleepless nights for thousands of people who have arranged their own private pension schemes.


These are usually described as one-member or self-directed schemes and are favoured by many directors of family owned firms and by expats who are self-employed or who negotiate their own contracts.

They amount to little more than a private savings plan but they are structured to take advantage of the tax concessions offered by governments to pension schemes.

Typically, these schemes invest in property, mainly buy-to-lets, and the value of investments fell substantially during the financial crisis a decade ago.

EU regulators believe such plans are too risky to provide real pension cover. They want these bespoke and self-administered schemes to be governed by the standards that apply to much larger occupational plans.

The new European Union IORP II (Institutions for Occupational Retirement Provision) directive would bar the schemes from long-term borrowing and restrict their freedom to hold unregulated investments.

The typical self-directed fund only has €450,000 in it. The new rules would restrict their investment in buy-to-let property to just €225,000, with no borrowing allowed to purchase the property.

The directive, which has to be signed into law by EU member states, faces legal challenges in a number of countries, mainly from real estate representatives who fear it will depress sales.

The challenges have bought a little time for holders of these plans to consider their position. Many single-member schemes are already compliant with the new rules. If you have one you should get it checked now.

I am always wary of property investments of this sort, which amount to little more than buying a property and drawing some rental income from it while hoping your holding increases in value. At best, they offer a poor return. At worst, the value of your asset may decline.

There is nothing wrong with investing in property as part of a managed portfolio. But investing solely in property is not a good idea and investing solely in just one property is very unwise unless it is the house you intend to live in.

Pensions, like all investments, are best managed in a structured scheme that does not put all its eggs in one basket. And trying to go it alone is really not advisable. You need expertise in your corner.

The Woodbrook Group offers comprehensive financial planning and investment consultancy services. We begin by learning about each client’s financial position and where they would like to be in the future. Once we understand your objectives, we look at all the options available.

We are able to offer advice on how your pension savings can be improved and protected so there are no unpleasant surprises when the time comes for you to retire. At Woodbrook Group we can help you understand your options, how to address your income needs in retirement and how much wealth you will need to support it.