Small Self Administered Schemes – SSAS – are growing in popularity.
As experts in Small Self Administered Schemes (SSAS), we have always been aware of the advantages they have, especially for directors of businesses in the SME sector that we specialise in. SSAS have been available since the early 1970s, and represent a market that is worth c. £26 billion. Some would say that SSAS have been somewhat overshadowed by SIPPs in recent years. However, an increased awareness of “pension-led funding” opportunities, coupled with the pension freedom reforms introduced in April 2015, has helped to put SSAS firmly back in the spotlight.
What’s the difference between a SSAS and a SIPP?
It’s true to say that pension simplification legislation in 2006 did bring SIPPs and SSAS closer together. However, SSAS do retain some unique features:
- Unlike a SIPP which operates a “sole trustee” model, all members of a SSAS should also be scheme trustees.
In practice, this means members have a greater say in the running of the scheme, for example, the SSAS provider cannot authorise a narrow panel of lawyers or bankers to run the scheme for the members.
In addition, should a member of a SSAS die, the decision as to where any death benefits are distributed would be that of the trustees. In a SIPP that decision (notwithstanding any member nomination) would fall to the SIPP provider as the sole trustee.
- Pension-Led Funding and Investment Options. One of the most common reasons for establishing a SSAS is to permit the scheme to “loan-back” to the business up to 50% of the fund as a secured loan.
A SSAS and SIPP can lend to unconnected third parties but a SIPP cannot lend to a connected party, meaning a SIPP cannot fund a member’s business.
Also, while most providers adopt the same due diligence procedures over the assets that are permitted for SSAS and SIPP, it is the case that SSASs are not subject to the FCA’s “standard” permitted asset types for SIPPs.
This distinction can prove useful under certain circumstances. For example, a SIPP provider who does not accept “overseas” commercial property as a permitted asset might well allow a property based in, say, the Republic of Ireland, as an asset within a SSAS.
What about Costs?
A SSAS can offer a cost effective solution for smaller firms, particularly where the scheme has two or more members.
And, since the trustees are free to select their own professional partners, costs can be kept to a minimum whilst offering greater control and investment flexibility.
Succession Planning with Small Self Administered Schemes
With the April 2015 changes in death benefits rules which allow tax-free cascade of both uncrystallised and drawdown funds on death pre-age 75, for family businesses, in particular, a SSAS can be a very tax-efficient means of accruing, protecting and finally cascading pension savings between the generations, within the existing vehicle. There are no unnecessary additional costs of setting up new schemes for beneficiaries, as they can remain in the existing SSAS.
Contact us About Small Self Administered Schemes
At Pensions Management Limited we specialise in SSASs, both the setting up of them and the administering of them through the Trustees. If you are a company director and are considering a SSAS, then contact us or call us on 0121 693 0690 for a free initial chat.