All You Need To Know About SSAS

SSAS Is The Most Flexible Pension In The UK

SSAS Is Short For "Small Self-Administered Scheme"

What Is A SSAS?

A SSAS is an occupational pension scheme, established by a UK company or partnership using legal trust papers supplied by a SSAS specialist.

Directors or partners of your business usually form the membership of your SSAS.  You can invite other people to join your SSAS, even if they're not employed by your business.

If you don't have a business, you might be able to join the SSAS run by a family member, a business colleague or a friend, for you don't have to work for their business to be invited to join their SSAS.  There could be advantages for both of you in combining your pension funds: for example, the purchase of a more expensive and profitable commercial property.

The maximum number of members in a SSAS is 11.

Benefits are provided on a money purchase basis.

Your pension trust is registered with HMRC to qualify for generous tax relief and a tax privileged investment environment.

At the heart of your SSAS is a bank account for collecting contributions, making investments, receiving investment returns and paying benefits.

All SSAS members are Trustees too, enabling you to take control of your pension decisions.

Investments purchased by your SSAS are held by the Trustees for the benefit of the members.

Trustees must generally be at least age 18, which prevents minors from becoming members.

Trustees ensure the SSAS is properly managed to safeguard the benefits for members and beneficiaries.

The law requires all Trustees to have relevant knowledge and understanding to perform their duties.  This can be particularly challenging, so unless you have relevant qualifications or business experience in this area, you would normally appoint an independent Trustee to act alongside you, to ensure you properly fulfil your role as Trustee. 

In short, your SSAS is the most flexible pension wrapper on the market, offering exclusive membership and unrivalled investment choice.  It enables you to benefit from every aspect of pension freedoms, while you’re growing your pension fund, during your retirement, and after for those you leave behind.

Why Choose A SSAS?

SSAS is designed for business owners who want to take control of their retirement in a bespoke and tax efficient environment.

You and your employer can contribute to your SSAS.  And you can transfer in other pensions.

SSAS has enormous flexibility to invest in all HMRC approved asset classes, including commercial property.

Investment returns are normally free from Income Tax and Capital Gains Tax.

Unique to SSAS is its ability to make a loanback to your business, subject to the rules.  It's a feature not available with SIPPs and other personal pensions.

You’ll be able to draw tax free cash from age 55, and a level of income that suits you and your Income Tax position.  There’s no need to stop work before you draw benefits.  And there’s no requirement to purchase an annuity.  What’s more, you can draw out your whole fund, though it’s worth checking your Income Tax position first.

On your death, the proceeds of your SSAS are normally free from Inheritance Tax, making it an excellent tool for generational tax planning.

What Can I Pay Into My SSAS?

Your SSAS can accept transfer values from most UK registered pension schemes, and you and your employer can pay in contributions regularly or whenever you require.

Contributions and transfers to your SSAS are paid in cash. 

It might also be possible to transfer existing assets 'in-specie' (as they are without having to sell them).  By way of example, this could be stockmarket assets, loans on peer-to-peer platforms, or commercial property.

Before you pay anything into your SSAS, we recommend you seek professional advice, to ensure you don’t fall foul of contribution limits which could incur you in a tax penalty. 

If you’re intending to transfer into your SSAS a final salary (defined benefit) pension, you'll normally be required to have received advice from a suitably qualified pension transfer specialist.  Virtually all pension providers will only accept a final salary transfer if the adviser provides you with a certificate positively recommending the transfer.

Where Can I Invest My SSAS Money?

A SSAS allows you to invest your pension money in the widest range of HMRC approved asset classes.

A few permitted investments are subject to heavy tax penalties and are best avoided.  These include residential property, 'moveable tangible property' such as vehicles, and alternative investments such as wine, cars, stamps and art.

You should be able to select the stockmarket platforms of your choice.  You should also be able to appoint a discretionary fund manager and a financial adviser.

In addition to holding commercial property, your SSAS could grant a loan to your business, subject to the rules laid down by HMRC.  Your SSAS can also grant loans to unconnected parties.

Prior to investment, the Trustees must unanimously agree on all investment decisions, ensuring they’re appropriate for the purposes of the SSAS.

If you’re unsure about your investment decisions, you should seek advice from a suitably qualified independent financial adviser.

A SSAS Loanback To Your Business

One of the most valuable features of your SSAS is that it can grant loans to your business to finance its growth.

Your business can borrow up to 50 per cent of the net value of the assets of your SSAS.  Interest paid on the loanback can be deducted as a business expense, but it’s received tax free in your SSAS.

The loanback must be prudent and secure and arranged on commercial terms in line with HMRC rules.  First charge security must be in place to protect your SSAS money.

To ensure the SSAS doesn’t enter into a loanback where the security is in doubt, and to ensure the Trustees are protected at all times, the SSAS would normally appoint an independent specialist lawyer to undertake all the associated legal work.

Your SSAS Can Buy Commercial Property

It can be very tax efficient and make good investment sense for your SSAS to buy the commercial property from where your business trades.

If the Trustees consider the commercial property is an appropriate investment, your SSAS may be able to buy it. 

It’ll mean that instead of paying a commercial rent to a landlord, your business will pay rent to your SSAS to grow your fund.  In addition, your SSAS will benefit from any rise in the capital value of the property, free from Capital Gains Tax.

It’s possible for your SSAS to borrow up to 50 per cent of the net value of its assets to assist with the purchase.  The Trustees must ensure the borrowing is suitable and affordable.

Property law and pension rules must be considered at every stage, making it essential for you to appoint a lawyer who’s well versed in SSAS property investment, to mitigate risk and to protect your SSAS benefits.

What Retirement Benefits Are Payable?

Your SSAS provides you with unrivalled flexibility when you come to draw benefits.

You’ll be able to draw benefits from your SSAS from age 55, or earlier in the case of ill health or other specific situations.  You can draw benefits from your SSAS while you’re still working.

These are the main retirement options:

  • Flexi-Access Drawdown
  • Lifetime Annuity
  • Flexible Annuity
  • Short-Term Annuity
  • Small Pot Lump Sum

What Happens On My Death?

The control and flexibility offered with your SSAS will be of value for your legacy planning.

As death benefits are paid out at the discretion of the Trustees, they should usually fall outside of your Estate for Inheritance Tax purposes.

What Does SSAS Cost?

Many SSAS operators charge fees based on a menu, for every aspect of your SSAS, whether you're building your fund or drawing your benefits.  It can quickly add up to a lot of money, especially if you diversify your SSAS funds across a range of investments. 

The most common complaint raised by SSAS holders charged on a menu is that they just don't know what their SSAS will cost from one year to the next.

It's usually preferable to be charged for the majority of the SSAS services you'll require on a fixed price.  That way, you'll know what your SSAS will cost to run and you and your business can budget accordingly.

What Services Are Available From SSAS Providers?

In 2006, legislation removed the requirement for a SSAS to appoint a professional "Pensioneer Trustee" to oversee the administration.  In its place, the requirement for a Scheme Administrator was introduced. 

Your business could either act as the Scheme Administrator, or it could appoint a SSAS Provider to undertake this work for you.  The considerable amount of work involved is set out on the Government's Website.

The Scheme Administrator role carries formal responsibilities and tax liabilities under pensions law for running your SSAS.  It’s also responsible for completing and submitting returns to HMRC and providing information to the pension scheme members and The Pensions Regulator.  It operates the bank account from which all financial transactions are made. 

In 2014, HMRC introduced further checks on all Scheme Administrators to ensure they are “fit and proper persons”.  This was largely due to an increase in issues with registered pensions schemes, including fraud.  More details can be found on the Government's Website

It’s usual for all members of your SSAS to be trustees too.  This imposes a variety of roles and responsibilities upon you, which are set out in detail on The Pensions Regulator Website.

What Is A Professional Trustee And Scheme Administrator?

These are formal roles undertaken by SSAS Providers that generally have expertise in pension trustee and administration matters.  They work alongside you and the other trustees to ensure your scheme is kept compliant with tax legislation and you’re kept informed of the latest developments. 

Most importantly, they take full responsibility and liability for the running your SSAS.

What Is A Practitioner?

A Practitioner is not a formal role.  Its aim is to support your business in complying with pensions law.  Whilst a Practitioner may effectively run all aspects of your SSAS, ultimate responsibility and liability for its activities will rest with the Scheme Administrator: ie your business. 

If you act as the Scheme Administrator and fail to comply with pensions law, the fines and sanctions that HMRC can impose upon your SSAS could wipe out a large proportion of your pension fund.

Should You Appoint A Professional Trustee And Scheme Administrator, Or A Practitioner?

The advantage of appointing a Practitioner is generally lower fees compared to appointing a Professional Trustee and Scheme Administrator.  It could save you up to a few hundred pounds a year.  However...

If you don’t have sufficient working knowledge of pensions and pensions tax legislation, or previous experience in being a SSAS administrator, your business and the members of the SSAS are likely to be better protected by appointing a Professional Trustee And Scheme Administrator, and NOT a Practitioner.

It's arguably the best way to meet the HMRC requirement that there needs to be a skilled pension person associated with the scheme.  And it's the best way to avoid substantial HMRC penalties for non-compliance, which could run into tens of thousands of pounds, or more!

It's for this reason that the SSAS Providers on our panel are all Professional Trustees and Scheme Administrators and NOT Practitioners.  If you want to 'go it alone', this service is not for you.  Here's a real example illustrating how a SSAS owner was left to his own devices.  And here's another SSAS example showing how complex this area can be.

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