What is an SSAS?


A Small Self-Administered Scheme (SSAS) is a flexible occupational pension scheme normally set up by the directors or partners of owner managed and family businesses. The SSAS can be set up to provide retirement benefits for both the business owners and their families.
While the members of the SSAS will usually be appointed as Trustees, it is best practice to also instruct a professional Trustee and pension administrator to take on the roles of ensuring compliance with the legislation and tax rules surrounding SSAS and pensions generally. HMRC recommends that all SSASs retain an independent trustee and administrator to avoid mistakes or even intentional misuse of pension assets which could lead to significant tax charges and personal liability.
The flexibility and cost effectiveness of a SSAS, linked to the tax benefits it can bring to a sponsoring employer, make it the pension vehicle of choice for the director-controlled company.

 

What are the benefits of an SSAS?

Rapid Decisions

Because the members are also the Trustees, this allows rapid and meaningful decisions to be made regarding invesments, as opposed to the broad brush approach from most SIPP providers who deal with volume rather than individual members.

Flexibility for Members

A SSAS is an extremely flexible pension vehicle. There can be partial or full crystallisation of a member’s fund with a tax-free lump sum payable and pension draw downs can easily be arranged. The tax charges on death do not currently apply in the event of death when receiving a scheme pension. As it is an occupational scheme, the trustees can take out term assurance on the life of a member and this facilitates the payment of substantial death benefits to relatives even if the fund is not substantial.

Flexibility for Sponsors

A SSAS can provide financial flexibility for the member and their business. For example, a SSAS can make a loan back to the sponsoring employer or purchase commercial property to lease back to the sponsoring employer at an open market rent.

Tax Benefits

Under current legislation an SSAS enjoys considerable tax benefits.

  • On retirement, it provides a tax free lump sum of up to 25% of the fund (limited to 25% of the Lifetime Allowance)
  • It will allow for flexible drawdown under the new pension rules from 6 April 2015 for any members over the age of 55.
  • Employer’s and Employees’ contributions normally qualify for tax relief in the year they are made.
  • Investments (other than dividend income) are generally exempt from UK Income Tax and Capital Gains Tax (CGT).
  • Lump sum benefits on death will normally be free from Inheritance Tax.

A Note about SSAS & Investments

We cannot accept the following types of investments as they are unsuitable for this type of pension scheme:

  • Residential property
  • Tangible moveable property
  • Loans to members or their relatives
  • Loans to connected companies where the loans are not to sponsoring employers
  • Investments that could be viewed as trading activities
  • Residential ground rents