Corporate & Director Pensions

A Small Self-Administered Scheme (SSAS) is a type of occupational pension scheme established for the directors and senior employees of a business. It is set up under ‘trust’ by the sponsoring employer for the benefit of the scheme members. There should be no more than 11 members, and each member acts in the role of trustee.

Each SSAS will require a scheme administrator whose responsibilities will include; registering the scheme with HM Revenue & Customs (HMRC), reporting to HMRC events relating to the scheme and the scheme administrator, and undertaking tasks to maintain the beneficial tax status of the SSAS.

Previously, a SSAS required the appointment of a professional trustee, although this is no longer the case. However, it is still highly recommended that you employ the service of an independent trustee who has expertise in legislation and HMRC practice. Some professional trustees will also act as scheme administrator and prevent member trustees from making unauthorised payments and breaching tax regulations.

Once a SSAS has been established and registered with HMRC, funds can be paid into the account by contributions from the sponsoring employer, contributions from members, and transfers from the members’ other pension schemes, where those members may benefit from increased flexibility. The funds will be invested in line with trust law with the aim to achieve growth.

Each member will have a ‘share’, or interest, in the SSAS fund. This will depend on the contributions and transfers paid in by or on behalf of a member, their share of any investment growth (or loss), and any relevant payments made from the SSAS for them. The amount of benefits that a member can receive will depend on the value of their share of the SSAS fund at the time they decide to take the benefits.

Loans

A SSAS can make a loan to the sponsoring employer. This can be a maximum of 50% of the net value of the assets, minus any existing loans, with a maximum term of five years. This loan can be used for most purposes, including cash flow and funding company acquisitions. Loans to unconnected third-parties, where a sound investment proposal exists, may not need to be secured. Your adviser will be able to discuss this with you further.

Commercial Property

The funds in a SSAS can also be used to acquire commercial property. This can include the sponsoring employer’s business premises, which can then be leased back to the employer. Not only does this inject valuable cash flow into the business, but provides a regular income which is free from income tax. There are a number of other advantages to holding property within a SSAS, including tax relief on any contributions used to purchase the property.

What are the features of a SSAS?

  • A SSAS can be used to make loans to the sponsoring employer
  • Funds can be used to acquire commercial property, including the sponsoring employer’s business premises
  • Members have considerable flexibility and control over investment policy and underlining assets – this also means more responsibility
  • Employer and member contributions may qualify for tax relief
  • Investment income and gains (other than dividend income) are generally exempt from income tax and capital gains tax
  • Depending on the scheme’s circumstances, members can usually take a tax-free lump sum of up to 25% of their share
  • Lump sum benefits on a member’s death are generally free of inheritance tax
  • Fees for administration can be paid for by the sponsoring employer and treated as a business expense

A SSAS will not be suitable for all investors. You should speak to one of our independent financial advisers if you have any questions, as they will be able to search the whole of the market to find the best possible option for you and your business.