Anthony Burgess (Pension & Investments)

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Products Updated August 26, 2020

SASS Pension Advisors

If you are looking for advice on the benefits of a Small Self Administered Pension Scheme (SASS) or you want to transfer your existing pension into a SASS our pension experts can help. Get in touch today or read our guide to SASS pensions below.

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A Guide To SSAS Pensions

Understanding the various pension options that are available can be overwhelming, especially if you are a business owner, self-employed or a landlord. When you have to make arrangements for your own pension, as opposed to relying on an employer to provide you with an appropriate scheme, there are a lot of different decisions you have to make. Many business owners choose to use SSAS pensions to fund their retirement.

So, just what is an SSAS pension?

This guide covers everything you need to know to decide if an SSAS pension is the right choice for you.

What Is An SSAS Pension?

SSAS stands for Small Self Administered Scheme, and it is an occupational pension that is set up by a partnership or limited company. It is set up by the directors of a company and is a pension scheme that is run by the trustees, which are often the directors or scheme members.

In some cases, specialist SSAS pension companies can act as trustees. An SSAS pension can have 11 members or less and can give a good level of control over how the pension pot is invested.

SSAS pensions are often compared to Self Invested Personal Pensions (SIPPs), but unlike a SIPP, an SSAS is classed as an occupational pension. This means that they follow slightly different rules and regulations and that both the small business and the members of the scheme can make contributions into it.

There is no requirement for any interaction with any financial institutions or insurance companies to set up and manage an SSAS pension, although some offer services to manage these on a company’s behalf.

Members of an SSAS pension do not have an individual pension pot within the fund. Instead, the scheme’s assets are all held in the name of all trustees. Every member is seen to have a share of the assets, which can be difficult to divide in the event of a fallout.

How Does An SSAS Pension Work?

When an SSAS pension is set up, it is generally to give company directors and key senior staff their retirement benefits. They are set up by the company or by a pension provider and are open to employees and even family members that are not employed by the business.

The main restriction is that there cannot be more than 11 members of an SSAS pension.

These trustees run the pension themselves and have full control over where the money is invested. With an SSAS pension, a director has the flexibility to invest in assets that aren’t generally available from other schemes. This includes purchasing a company’s premises and leasing it back to the company and investing in the business itself.

Both the members and the company can make contributions to an SSAS pension, and each will receive tax relief on the contributions that are made.

Who Are SSAS Pensions For?

Business owners and directors are generally the types of individuals that will take out an SSAS pension. This type of pension can have up to 11 members, and they can be employees or family members of employees as there is no requirement for them to work for the business.

It is common for every member of the SSAS pension also to be trustees of the scheme. This type of pension is a popular choice for business owners who want to fund their business growth because an SSAS can grant loans to the sponsoring company as well as buying its shares.

This gives business owners a range of different ways to invest in their own business and is often a more competitive option than other forms of business finance.

While it is possible for an SSAS to grant a loan to the sponsoring company, this is subject to stringent conditions. This depends on the loan amount, term, repayment scheme, interest rates and security.

What Are The Advantages Of An SSAS Pension?

There are many reasons why business owners and directors choose SSAS pensions instead of other retirement funding options. Some of the main advantages include:

  • Tax Relief: SSAS pensions are registered with HMRC and so benefit from generous tax reliefs, including company and personal contributions that are deductible against tax. There is also no income tax on allowable investments and no capital gains tax that is due on disposal of investments. Members can receive a tax-free lump sum from age 55 on their retirement, or a tax-free lump sum on death before retirement.
  • Business Benefits: There are various benefits to the company when owners choose an SSAS pension. The pension can be used to purchase a commercial property and then lease it back to the business or another third party. Loans can be given to the sponsoring company, and members can invest in the company by buying an equity stake.
  • Investment Freedom: SSAS pensions give members increased flexibility over where the assets can be invested compared to other pension schemes likes SIPPS. Most SIPP providers have certain restrictions in place and rules on where the pension can be invested, whereas SSAS pensions allow members to invest in assets that could be considered too risky.

If an SSAS pension is used to lend money to a business, it is required to charge interest on the loan amount. This is often lower than commercial bank rates and other lending options.

What Are The Disadvantages Of An SSAS Pension?

It is also important to be aware of the downsides that come with an SSAS pension:

  • Responsibility Of Running It: When a company director sets up an SSAS, they will be responsible for running it. This includes submitting a return annually to the Pensions Regulator, registering the SSAS scheme with HMRC, arranging tax relief on all payments made into the scheme, and reporting changes to HMRC.
  • Restricted To Company Directors: Unlike SIPPs, SSAS pensions can only be set up by a company director. This severely limits the number of individuals that can benefit from an SSAS pension as they are not open to everyone.
  • Limited Members: An SSAS pension can only have up to 11 members. Although there is the freedom for these members to be family members, not employees, it does restrict the number of people that can benefit from the pension.

There are a number of pension providers and companies available that offer SSAS trustee services. This means the responsibility of running the pension can be passed onto a third party.