PENSIONS

SSAS

Tailored pension plans for a safe future

What is an SSAS?

A Small Self-Administered Scheme (SSAS) is a form of occupational pension scheme established by a single sponsoring employer. Company directors and other key employees often utilise it to secure retirement benefits. Typically, each employer is allowed only one scheme, which can include up to 11 members.

A key feature of an SSAS is that its members often act as the scheme’s trustees, sometimes through a corporate trustee company. This grants them significant control over the scheme’s investment strategy but also imposes fiduciary duties and legal responsibilities to manage the scheme in accordance with pension law.

Limits and allowances

Both members and the sponsoring employer can make contributions. Member contributions may qualify for personal tax relief, subject to the usual limits and allowances. Employer contributions are often deductible against corporation tax, provided they meet HMRC’s ‘wholly and exclusively’ for the purpose of business test.

The main appeal of an SSAS is its investment flexibility, which is considerably greater than that of standard pension schemes. Members can pool their individual funds to make larger investments.

Common investment options include:

Commercial property: An SSAS can purchase commercial property, which can then be leased back to the sponsoring employer on commercial, market-rate terms.
Loans to the sponsoring employer: A loan of up to 50% of the scheme's net asset value can be made to the employer, subject to strict HMRC rules regarding security, interest rates, and repayment terms.
Other assets: A broad range of other investments is permitted, such as quoted stocks and shares, cash deposits, insured funds, and even shares in certain unlisted companies.

Minimum pension age

However, there are strict rules against certain investments, such as residential property or tangible movable assets (like art or cars). Making a prohibited investment can lead to significant tax penalties.

When it comes to taking benefits, an SSAS generally follows the same rules as other defined contribution pensions. Members can usually access their funds from the minimum pension age, take up to 25% as a tax-free lump sum, and utilise the remaining funds for options like drawdown or purchasing an annuity. On death, the remaining fund can typically be passed on to beneficiaries in accordance with the scheme’s rules.

SSASs ARE REGULATED BY THE PENSIONS REGULATOR. THE VALUE OF PENSIONS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED. TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.