SSAS


(Small Self Administered Scheme)

Small Self Administered Scheme (SSAS) is a type of UK Occupational Pension Scheme.

Schemes are trust-based and established individually, usually by directors of limited companies for specified employees of the company. Since pension simplification(also known as A-Day), SSAS has been available for establishment by those who are not in a limited company (i.e. Partnerships and Families).

 

Tax Treatment

SSAS registered with HMRC may enjoy tax-exempt status, all investments made will be free of Capital Gains Tax, and contributions to the SSAS will receive tax-relief (if contributions are made by a “Relevant UK Individual”). Basic rate tax relief can be claimed by the SSAS itself, and any higher rate tax would be claimed through the member’s tax return.

The sponsoring employer can also pay contributions to the scheme and may obtain tax relief on the contributions.

Tax relief on personal contributions is calculated at the person’s marginal rate of income tax, and for company contributions it is calculated as the company’s marginal rate of corporation tax. Third party contributions may be made in some circumstances.

 

Ownership

Provided that the members of the SSAS pension scheme are also trustees, there is a lesser regulatory requirement than if all members were not trustees. This is because the members of the SSAS pension scheme are deemed to be investing the funds for themselves.

The trustees can invest the funds as they consider appropriate to the needs of the SSAS pension scheme. For example, the trustees can invest the assets of the pension scheme in the company that sponsors the SSAS pension scheme. This can take the form of loans to the employer and the purchase of shares in the sponsor, however, there are limits that apply. One must be very careful purchasing shares in the company through a SSAS, ‘Taxable moveable property’ laws can easily be breached. Guidance from the SSAS Practitioner or Administrator is required.

SSAS are suited to groups of individuals who run a common businesses and wish to have complete control over the pension fund. The costs per member are usually lower than using individual SIPPs to pool funds to purchase commercial property. SIPPs do not have the facility to loan funds to associated or unassociated employers. There is no requirement for a professional to be appointed to the scheme, however, the rules are complex and may well prove difficult for individuals without experience running SSAS.

The Trustees may wish to appoint a professional company to assist with the management of the scheme. This company may operate as SSAS Practitioner or as the Scheme Administrator. They both carry out the tax returns and other such submissions to HMRC and the Regulator. If the scheme returns are not correctly undertaken a penalty can be assessed against the trustees of the pension scheme.

If a scheme Administrator is appointed to run the scheme, they are usually co-signatory on the scheme’s investments. A SSAS Practitioner will not be co-signatory, this leads to Trustees and beneficiaries of the scheme having far greater control over their pension assets and enables the scheme to run more efficiently.

 

Investment Choice

The investments allowable for a SSAS are very similar to a SIPP. The Trustees of the SSAS may make choices about what assets are bought, leased or sold, and decide when those assets are acquired or disposed of, subject to the unanimous agreement of all trustees.

The range of assets permitted by HMRC includes:

  • Stocks and shares listed on a recognised exchange(s)
  • Futures and options traded on recognised futures exchange
  • Authorised UK and and other UCITS funds
  • Unauthorised unit trusts that don’t invest in residential property
  • Investment trusts subject to FSA regulation
  • Unitised insurance funds from insurers and IPAs
  • Deposits and deposit interests
  • Commercial property (inc. hotel rooms, with certain restrictions)
  • Traded endowment policies
  • Derivative products such as a Contract for difference (CFD)
  • Gold bullion, which is specifically allowed for in legislation

Investments currently permitted by primary legislation but subsequently made subject to heavy tax penalties include :

  • Any item of tangible moveable property (whose market value does not exceed ¬£6,000) – subject to further conditions on use of property
  • other exotic assets like vintage cars, wine, stamps and art
  • Residential property

 

Benefit Rules

The pension benefits payable include a tax free cash sum from the age of 55; plus a pension income paid from the pension scheme. On death the benefits may be paid out to beneficiaries, special rules apply on death after age 75. There is no requirement to purchase an annuity.

 

Advantages of a SSAS

There are multiple advantages of a Small Self Administered Scheme (SSAS) to any small to medium sized business, especially with regard to family businesses. These include:

  • Pension can easily be transferred
  • Contributions that are flexible including Income Tax relief (and Corporation Tax and National Insurance relief on Company Contributions)
  • Investment control
  • Purchase of Commercial Property
  • Property purchase borrowing
  • Residential Property Collective Investment Schemes
  • Purchase of unquoted shares
  • Flexible retirement options
  • Open to more than one member
  • Loans to the business

PPAS Ltd offers comprehensive professional administrative services to operate a SSAS effectively and efficiently including:

  • All required scheme documentation
  • Management of scheme bank account
  • Annual report and meeting
  • Benefit calculation
  • Completion and submission of the pensions scheme annual returns

Please note that to take advantage of the full investment benefits of a SSAS, all the members must be trustees.