SSAS – How are they different to SIPP pensions?

What is a SSAS?

SSAS stands for small self-administered scheme. A SSAS is a special form of occupational pension scheme, primarily designed for controlling directors of private companies. SSASs are offered mainly by pension consultants, but some insurance groups offer SSASs, often with links to their pension investment products.

What are the advantages of a SSAS?

A SSAS is registered with HMRC and so benefits from the usual generous tax reliefs afforded to pension schemes such as:

• • Company and personal contributions are deductible against tax
  • No income tax on allowable investments
  • No capital gains tax due on disposal of investments
  • A tax free lump sum from age 55 on retirement
  • A tax free lump sum on death before retirement.

What are the main benefits of a SSAS over a SIPP?

A SSAS’s benefit and investment flexibility is very similar to those of a SIPP, although strictly speaking the choice of investment rests with the trustees.

The main benefit of SSAS over SIPP is the ability to make loans to the sponsoring employer.

A SIPP cannot lend money to a member or anyone connected with the member. The ‘no connection’ rule means that a SIPP cannot lend to the company of a director member. If pension-backed loans to an employing company are important to you, then a SSAS is the route to take.

However, it is important to bear in mind that the company will have to provide full security for the loan, which must have an initial term of no more than five years and be repaid in equal instalments of capital and interest.

Who would usually choose a SSAS?

SSASs are primarily set up by private and family run limited companies for the benefit of the owner directors and senior employees. The members are also trustees and so have control and flexibility over the Scheme assets and investment choices in a tax efficient environment.

What are the costs of a SSAS?

The costs of establishing and administering a SSAS are greater than those of an individual SIPP. But if three or more members are involved then the costs of a SSAS are likely to be lower and, as mentioned earlier, property transactions are significantly less expensive in a SSAS than in a group of SIPPs.

Interested in learning more about SSAS’s and how they can benefit you? Get in touch today to speak with our expert pension adviser’s. Tel: 0151 520 4353. Email: [email protected].