Should I Set Up A Small Self Administered Scheme (SSAS)?

14 May 2020

A Small Self Administered Scheme (SSAS) is a pension scheme based on defined contribution with benefits in terms of control, flexibility and tax efficiency.

advice : Employment

A Small Self Administered Scheme (SSAS) is a pension scheme based on a defined contribution that can be set up by a limited company.

This type of Scheme offers many benefits in terms of control, flexibility and tax efficiency. It is typically set up by private or family-run companies, with owners/directors trustees.

The trustees have full control over the scheme’s assets and investments, with a few restrictions. If all the members are trustees, SSAS schemes benefit from the same advantages as other pension schemes, although it has lower administrative costs than other occupational pension schemes.

When it is registered with HMRC, a SSAS benefits from tax reliefs such as:

  1. Both company and personal contributions are tax-deductible;
  2. No income tax is due on allowable investments;
  3. No CGT is due on disposal of investments;
  4. It can pay a tax free lump sum on retirement;

HMRC requires the Scheme to be registered with an Administrator, which is usually the company sponsoring the pension Scheme.

Benefits of a SSAS

The following are some of the benefits of a Small Self Administered Scheme.

Creditor Protection: should the Administrator company ever fail, assets within the Scheme are protected from creditors.

Flexible Business Loans: a SSAS is allowed to lend to an associated company up to 50% of its own value. Typically, loans are paid back at an interest. The key advantages are that these loans can be offered with higher flexibility compared to a commercial lender; moreover, the interest gets paid into the members’ pension fund, which is preferable to paying a third party lender.

Extra liquidity: by using the 50% loan rules, companies that set up a SSAS have easy access to liquidity to perform otherwise complex operations such as:the buyback of shares in preparation of an exit or the purchase of another company.

Additional benefits: an extremely flexible instrument, a SSAS also offers the following advantages

  • It can invest in a share in the associated company;
  • The costs of running it are a deductible business expense;
  • It provides a tax-efficient vehicle to invest in property, as growth is exempt from CGT and rental income is tax-free;
  • It can be used to protect intellectual property by transferring it to the SSAS and licensing it back to the company;
  • It provides a convenient retirement vehicle for directors, especially useful when there isn’t a plan for an exit.

If you are interested in setting up a SSAS, we would recommend getting in touch with a wealth advisory firm such as Strabens Hall, who are award-winning Chartered Financial Planners.

The information available on this page is of a general nature and is not intended to provide specific advice to any individuals or entities. We work hard to ensure this information is accurate at the time of publishing, although there is no guarantee that such information is accurate at the time you read this. We recommend individuals and companies seek professional advice on their circumstances and matters.