SSAS and SIPP. What’s the Difference?

What’s the difference between a SSAS and a SIPP?

Here at Pensions Management we specialise in Small Self Administered Schemes (SSAS), providing expert service and advice for the setting up and running of SSASs for clients of all sizes, but especially owners/directors of small companies.

We are often asked what the difference is between a SSAS and a SIPP (Self-Invested Personal Pension), and the answer is that there are differences, but perhaps not as many as you might think.

They are both Pension Schemes registered with HMRC, thereby enjoying substantial tax advantages, and their key features are summarised below.

Key Features of a SSAS

A SSAS is an occupational pension scheme, usually set up by the directors of a business. Typically these directors want greater control over the investment decisions that relate to their pensions, especially the use of their pension plans to invest in the business.  As a result, each member of the SSAS is a trustee, a requirement to avoid the onerous provisions under the Pensions Act 1995 (brought in as a direct result of the actions of Mr Robert Maxwell, who embezzled a large amount of money from the pension fund of Mirror Group Newspapers).  These are the key features of a SSAS:

  • It is an occupational pension scheme,
  • The members are usually employees or directors of the sponsoring employer,
  • There is a limit of 12 members,
  • Each member of the SSAS has a notional share of the funds including such non-insured assets as property and Open Ended Investment Companies (OEICs), alongside insured assets such as Trustee Investment Plans.

Key Features of a SIPP

A SIPP is a personal pension plan, which in contrast to a SSAS is usually set up by an insurance company or a SIPP specialist. The member has greater control over the investments but does not necessarily have to be a Trustee. Anyone, not just directors, can take out a SIPP providing they meet the eligibility requirements, which are usually based on a minimum fund size because of the higher costs involved in running a SIPP compared to a standard personal pension. Other key features of a SIPP include:

  • A SIPP is a personal pension plan,
  • It offers the option to invest in both non-insured assets such as property, OEICs and insured assets such as a trustee investment plan,
  • The SIPP member’s employer can contribute to the member’s pension plan and may operate payroll deduction on the member’s behalf.

In summary, the key differences are:

A SSAS:

  • Has greater investment flexibility and control by the Members/Trustees
  • Can lend to the sponsoring company
  • Has members that are Trustees
  • Is a cost efficient pension scheme for company directors and/or other family members employed in the business

A SIPP:

  • Is open to anyone
  • Cannot lend to a sponsoring company (as there isn’t one!)
  • Is a type of personal pension, usually with higher running costs, particularly if there is more than one member as each member has their own SIPP. Compare this with a SSAS, which can have up to 12 Members participating in the same fund.
  • The SIPP provider usually acts as the Trustee, not the Member

How to choose between a SSAS and a SIPP

As you can see there are some key differences between the two.  Ultimately, perhaps, the biggest difference for us is that a SSAS is usually open only to company directors, and since we specialise in working with company directors, that is why we specialise in SSAS.

A SSAS has more flexibility than a SIPP when it comes to investment.  This is because current legislation allows investments to be made in the sponsoring employer, which a SSAS has and a SIPP hasn’t.

Membership of a SSAS requires a much higher degree of involvement in the administration of the scheme than membership of a SIPP does, not least because there are still some key differences in the practicalities of running them, which are beyond the scope of this article. Suffice it to say, we know what they are!

So what is the most appropriate arrangement? Well, that depends to a large extent on who the members are and how much involvement in the running of the scheme they want.  This comes down to personal preference as much as anything else and what your objectives are, but a SSAS is a perfect pension planning vehicle for like-minded Directors and/or family members because of the degree of control over and above a SIPP and cost.

We are here to help you run your SSAS and comply with legislation.  In practice, we “do it all” which leaves key company staff and Directors to do what they are good at – running their businesses.

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.

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  • Mr A.W.PML has been my pension adviser for many years. PML are helpful, approachable and knowledgeable.