Small Self-Administered pension Schemes (‘SSASs’) are trust-based UK Registered Pension Schemes individually registered with Her Majesty’s Revenue & Customs (‘HMRC’).
They have been utilised by entrepreneurs, owners, and directors of businesses, senior executives and their families since 1973.
An SSAS must be initially established by an employer – which may be a trading or an investment company or a partnership or sole trader – for the benefit of one or more employees.
Members are generally appointed as Trustees and membership is limited to 11 members.
An employer may also establish more than one SSAS.
How do SSASs operate?
Once established and registered with HMRC an SSAS can potentially accept contributions from the establishing employer and/or other employers who agree to participate in the pension scheme, personal contributions from individual members and transfers from other UK Registered Pension Schemes.
The Trustees of the SSAS may at their discretion, in addition, admit other individuals to membership and who need not necessarily be employees of the original establishing employer. As such an SSAS can be used either to pool the pension resources of family members or other affinity groups – as well as business partners, directors and employees, or separate investments can be made for each member.
In a Member-Directed Pension Scheme, the Member Trustees may choose to direct the investment strategy themselves and/or appoint investment managers or advisers of their choice from time to time to assist them. Member Trustees may decide to diversify the investment management of the fund and combine some member direction whilst also utilising the services of a number of different investment professionals.
An SSAS may invest in a wide range of investments including bank and building society deposits in any currency, quoted or unquoted stocks and shares in the UK and overseas, bonds and fixed interest securities, collective investments, insurance company funds, debentures, loan stock and loans to unconnected parties and commercial property and land in the UK or overseas.
An SSAS uniquely can lend up to 50% of its net asset value back to participating employer pension scheme – subject to statutorily prescribed terms.
In addition, an SSAS is permitted to borrow up to 50% of its net asset value to assist in the acquisition of assets or the provision of benefits. Such borrowing does not necessarily need to be provided by an institutional lender and can be arranged from a connected person or entity providing this is a structure on commercial terms.
A SSAS may also transact or participate with scheme members and connected parties and others, either by purchasing or selling assets or by acquiring assets in partnership – again, on commercial terms.
Benefits can be drawn by a member of the SSAS on attaining age 55 with opportunities to draw a tax-free lump sum – in general terms up to 25% of their savings subject to a Lifetime Allowance set by the UK Government – either in its entirety or in stages and thereafter to draw upon the residual fund as he or she wishes subject to personal income tax rates.
The benefits of a SSAS
A SSAS combines the tax advantages of UK Registered Pension Schemes in respect of contributions tax relief and income, capital gains, and inheritance tax exemptions with a high degree of individual control through member trusteeship and a far greater choice of investment options and provides the maximum flexibility for benefits and investments of any UK pension scheme.
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