The SSAS pension
in a nutshell
In a nutshell, the Small Self-Administered Scheme (SSAS) pension is the most versatile pension scheme in the UK. A SSAS is a corporate pension and is regulated by HMRC and The Pensions Regulator. Exclusively available for business owners, it enables you to take control of your frozen or dormant pensions and pool the funds all in one place, allowing flexible investments – all before the age of 55!
The SSAS has been around for over forty years and can be the catalyst for transforming the success of SME businesses. It allows up to 10 additional members to join the SSAS with only one set of fees. The additional SSAS scheme members can either be other directors of the company, key employees of the business or family members. Each individual member is able to transfer in their own pension funds if they wish to. They then own the same percentage value of the pot that they put in, as it grows.
The Business SSAS
‘The Business SSAS’ pension allows for flexibility and control and allows you to align your pension with your business strategy. Consolidating your current pensions makes them far easier to monitor and could allow for many additional benefits, such as saving tax, increasing your investment choice and power and the opportunity to reduce costs and charges. One attractive benefit of the SSAS for company directors is that you can loan up to 50% of your pension pot to your company from this type of pension scheme, arranging to pay back the loan at regular instalments over 5 years.
The loan must be paid back at 1% above market base rate. Some choose to do this to get a low interest loan and others do so to pay a high interest rate so that their company year-end profits are reduced. You can then use any remaining funds to invest in multiple ways and create growth on the rest of the pot. Whilst your business and personal goals might immediately take advantage of one area of the SSAS, it is important to learn about and take full advantage of the many other benefits that the scheme can offer as this can then align your personal and business strategy not only throughout the whole of your lifetime, but your beneficiaries and their futures also.
The Property SSAS
As a company director, ‘The Property SSAS’ works as a tax efficient wrapper which can be used to fund and grow your property portfolio. Investing in property can be exciting and profitable, and by investing in a tangible asset you are taking less of a risk than investing in the volatile stocks and shares market. When looking at property investment via a SSAS, there are certain rules and regulations set out by HRMC that must be adhered to. HMRC SSAS rules state that a SSAS “can only invest in or hold commercial property. It cannot invest ‘directly’ in, or hold, residential property.”
One of the reasons that many company directors look to the SSAS, is that your SSAS can buy your business premises. Doing so entrusts the property to the pension. The property could gain in value, but if sold, the SSAS as a pension does not pay capital gains tax on the profit. The premises are owned by the SSAS, but as it is your SSAS, the asset is essentially still controlled by you. Rent you pay for the premises is classed as a business expense, so your company is afforded corporation tax benefits on payments to the SSAS and the rent the scheme receives is not liable for income tax, all potentially helping to grow the pot. Also, because your company is paying rent, the year-end tax bill for the company is lowered as profits are being paid into the SSAS as rent, lowering what you have to pay tax on at the end of the year. There are many other property investments that can be made with the SSAS, for example purchasing commercial property, developing land or perhaps the hands-free opportunity to invest in property crowdfunding.
The Family SSAS
Another exciting part of the SSAS is the legacy aspect. Sometimes known as ‘The Family SSAS’, it is one of the most tax-efficient vehicles available for inheritance planning and achieving optimum tax efficiency for your family. You can cascade the SSAS pension fund and its assets down through your family, free of inheritance tax. Members will have already elected their chosen beneficiaries and upon the death of a SSAS member, benefits within the SSAS can be paid at the discretion of the remaining trustees. These do not form part of the estate as they are owned by the SSAS and are being held in trust, therefore, not liable for inheritance tax. Benefits are paid to the beneficiaries either as a lump sum, via the purchase of an annuity, or benefits can be retained in the scheme and paid as drawdown pensions benefits. It must be noted however, that should a member die ‘after’ the age of 75, the beneficiary will be liable for income tax on the benefits. This is not the case if the member dies before the age of 75.
The SSAS can invest in all the things other pensions can invest in, plus much more and all on your terms, as and when you decide. The direction that you take to reach your full SSAS potential is entirely up to you, but with the help of our expert consultants at TLP, setting up a Small Self-Administered Scheme pension is nothing but simple. Our relationship with you starts by understanding your personal situation and helping you to decide if the SSAS will work for you. Once you have decided if the SSAS pension will have a positive impact on your personal and business goals, we will work alongside you to create a robust and innovative strategy for long term SSAS success!