Small Self-Administered Schemes (SSAS) continue to be the most flexible pension arrangement for Shareholding Directors and Stake Holding Partners.
There are however numerous pension schemes available to Directors and Partners.
What is a SSAS?
A SSAS is established with a Trust Deed and Rules where the Directors select the Members, who are usually also the Trustees, and you are likely to need a Professional Trustee service to help you set up and run the scheme.
The Trust Documentation and the Rules of the Scheme must be in accordance with the requirements of HMRC which registers each Scheme and grants Tax Exempt status.
The Sponsoring Company makes contributions on behalf of the Directors and Members, where, employer pension contributions are treated as a trading expense, thereby attracting full Corporation Tax Relief.
This means the Sponsoring Company may make contributions when profits and cash flow allow. The contribution should not exceed the Maximum Contribution Annual Allowance in order to obtain Tax Relief.
Benefits of the SSAS
Perhaps the greatest benefit to SSAS members is the breadth of investments allowed, and the overall flexibility of these schemes, which can help enhance the retirement benefits for a company directors and scheme members.
- In addition to quoted equities, gilts, collective investments (OEICs, Unit Trusts, Investment Trusts etc) and cash deposits, authorized investments include Land and Commercial Property (which may be leased back to the sponsoring company).
- SSASs can be used to facilitate Management Buy Outs or MBOs.
- The Scheme Trustees may borrow up to 50% of the net asset value of the Scheme.
- The Trustees may also advance a secured loan at a commercial rate of interest to the Sponsoring Employer.
- Most assets and investments within the scheme have no tax liability. For example bank interest and rental income are exempt from tax; also commercial property within the scheme is exempt from Capital Gains Tax on the ultimate sale. However tax credits from dividend income cannot be reclaimed.
- From age 55, the Member may commence taking a pension relevant to the value of the scheme investments and assets. As with any other pension, the Member may also take a maximum Tax Free Cash Lump Sum of 25% of the fund value.
Disadvantages of SSAS:
- Normally limited to 11 members;
- Establishment and running costs can be higher;
- Investing in property can concentrate risk, and create conflicts if members wish to retire or transfer benefits to another scheme;
- At least one member, but more commonly all members will be a trustee and have legal responsibilities for liabilities and the running of the pension.
Want further information?
Perhaps the most important advice I give to my clients is to plan carefully and do not leave things to chance. My job is to help you grow and protect your assets by providing the know-how you need to make informed decisions about your future. I then help you implement the strategy into a reality by working with you over the long term, helping you to build, brick by brick, a successful and robust financial situation.
Get in touch to discuss your Pension scheme requirements.