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What is a SSAS (Small Self Administered Scheme)?

A SSAS, or Small Self Administered Scheme, is a type of UK occupational pension scheme. A SSAS is set up by a trust deed and rules and allows members / employers, greater flexibility and control over the scheme’s assets. A SSAS is usually limited to members who are likely to be Directors or key employees of a company – which is known as the ‘sponsoring employer’.

HM Revenue & Customs now refer to a SSAS (and SIPP) as an “investment regulated pension scheme”. A SIPP (normally “contract based”) where one or more of its members is or has been able (whether directly or indirectly) to direct, influence or advise on the manner of investments held for the purposes of an arrangement under the scheme relating to the member. It also applies where the condition is satisfied by a person related to the member. For a SSAS an investment regulated pension scheme is one which has at least one member who meets the self-direction condition above, and where there are fewer than 50 members.

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How is a SSAS set up?

The SSAS is established under trust by the sponsoring employer for the benefit of the scheme members and other potential beneficiaries. All members of the SSAS should be trustees. Whilst it is subject to the same rules regarding contributions and benefits as an insured company arrangement, a SSAS is much more flexible and gives control of the underlying scheme assets to the trustees.

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Why choose a SSAS?

A SSAS can provide financial flexibility for a business. For example, in line with HMRC rules, the SSAS can make a loan to the sponsoring employer or purchase commercial property to lease back to the sponsoring employer at an open market rent.

Under current legislation a SSAS enjoys considerable tax benefits:

  • Employers’ and Employees’ contributions normally qualify for tax relief in the year they are made
  • Investments (other than dividend income) are generally exempt from UK Income Tax and Capital Gains Tax (CGT)
  • Lump sum benefits on death will normally be free from Inheritance Tax
  • On retirement, a tax free lump sum of up to 25% of the fund can be drawn down (limited to 25% of the Lifetime Allowance), unless the lump sum is “protected”.

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Who is suited to a SSAS and what is the difference between a SSAS and a SIPP?

SSAS are suited to either an individual or a group of individuals who run a common business and wish to have complete control over their pension fund. For a group, the costs per member are usually lower than using individual SIPPs to pool funds to purchase commercial property.

Unlike a SSAS a SIPP member does not have any ability to grant a loan to a connected party, neither may they normally pool their investment interest and holdings. For these reasons a SSAS is normally favoured by members who are happy to have and can share a common interest and the incumbent responsibilities.

There is no requirement for a professional to be appointed to a SSAS, however the rules are complex and may well prove difficult for individuals without experience of running a SSAS.

 for more about SSAS and SIPP.

What contributions can be made into a SSAS?

Contributions paid into a SSAS are subject to the same rules as other registered pension schemes. Consequently there is no limit on the level of member and employer contributions, but tax relief is restricted.

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  • SSAS and Legal Entity IdentifiersWhat are Legal Entity Identifiers and Does Your SSAS Need One? From 3rd January 2018 it will be a requirement for legal entities and structures to obtain a reference called a Legal Entity Identifier (LEI) from the London Stock Exchange in order for the trustees of a SSAS to carry on investing. This» Read More
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