Small Self-administered Scheme (SSAS)
Small Self-administered Scheme Scheme (SSAS)
A small self-administered scheme (SSAS) is a defined contribution pension scheme set up under trust with fewer than 12 members. The SSAS is registered with HMRC and governed by a trust deed and rules.
A SSAS is primarily set up for private and family run limited companies for the benefit of the owner directors and senior employees. The members are also trustees and so have considerable control and flexibility over the scheme assets and investment strategy.
How does a SASS pension work?
Like most defined contribution schemes, the employer and/or its members pay contributions, which are all eligible for tax relief. Members can start withdrawing benefits from the age of 55 (57 from 6 April 2028) in the standard way, with the same option of taking 25% as a tax-free lump sum.
Members of the scheme have control over their investments. A range of investment options, including commercial property, are available to invest in.
SSAS is run by a nominated scheme administrator and its trustees. The trustees are also usually members.
It also allows company directors to invest in their own business through their pension. A director can also loan money to their business from their SSAS pension. This means they could use a SSAS to help expand their business.
Advantages of SSAS
The main benefits are: –
- You are responsible for managing your own SSAS pension. This means you have control over your investments
- SSAS allows directors to invest in their own company. A director can invest up to 5% of his business.
- A SSAS allows you to offer commercial loans to your own company. As long it is for investment purposes, you could use your pension scheme to help your business expand.
Disadvantages of SSAS
The main disadvantage of the scheme is
- No more than 11 members can join a SSAS scheme
- The members themselves must act as trustees and there will be not be any pension provider. Therefore, they carry the legal responsibilities of running the scheme and ensuring compliance with pension law.
- The trustees have the responsibility of reporting to HMRC and arranging tax relief collection.
Tax benefits of SSAS
- The company’s contributions would normally qualify for Corporation Tax relief for the accounting period in which they are paid.
- Members can pay personal contributions (which would qualify for Income Tax relief) but it is normal for a SSAS to be funded by employer contributions, to reduce National Insurance liability.
- Investments are generally exempt from UK Income Tax and Capital Gains Tax (CGT).
- Basic rate tax payer will receive 20% tax relief on your eligible contributions.
- If you are a higher rate taxpayer, you can claim further tax relief (at your higher rate) from HMRC. This is usually claim through your self-assessment tax return. The rates are slightly different in Scotland.
- On retirement, a tax free lump sum of typically 25% of the fund can be taken.
- There is no Inheritance Tax (IHT) on pension scheme funds.
- If a member dies before age 75, irrespective of whether they have drawn benefits or not, their entire remaining share of the fund may be paid free of tax to their nominated beneficiaries as a lump sum or income.
- If a member dies after age 75, payments to a nominated beneficiary will be subject to income tax at the beneficiary’s marginal rate.
- Fees can be paid by the employer and would be treated as a business expense.
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
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