A Small Self-Administered Scheme (SSAS) is a specialised type of employer-sponsored defined contribution pension scheme used by business owners. As a director-owner of your own limited company you are not required to provide an auto-enrolment workplace pension for yourself even though you are considered to be an employee of the business. For employers with employees please look at our Payroll page which includes information on your legal obligation to provide a workplace pension. Regardless of whether you have a responsibility to provide pension contributions for employees or not, it is still important to consider your own retirement plan. SSAS is a popular option for many as it offers flexibility, control and additional benefits.

SSAS

 

What kind of businesses is a Small Self-Administered Scheme suitable for?

Small limited companies or partnerships can use SSAS as the pension scheme will only allow for a maximum of 11 people to benefit. SSAS benefits are particularly beneficial for family-run businesses and it is one of the reasons why they are also often an asset that is passed on through inheritance.

What are the benefits of a Small Self-Administered Scheme?

Investment freedom and control

One advantage of setting up a SSAS is that there is no requirement to use financial institutions or insurance companies. Members of the scheme manage the investment themselves and can choose from a greater range of assets to invest in – including loans, commercial property, equities, gilts, managed funds, unit trusts, structured products and deposit accounts (some of these are not available to invest in through other pension schemes). What’s more, you also have the choice of using your SSAS to invest in your own company, however there is a limit as to how much you can invest when investing in your own business.

Extends to non-employees

Although you are allowed a maximum of 11 people to join the SSAS, you can include people who are not employees of your business such as family members. Many family-run businesses will use a SSAS and choose to include their children. Alternatively, you can reward and retain key senior employees by including their family members in the scheme regardless of whether they work for the company or not.

Low-cost lending

Where you need to borrow money for your business, a bank loan can mean high interest rates. Instead, you can borrow money from your SSAS which offers more favourable rates.  A maximum of 50% of the total amount of cash held in the scheme can be borrowed at a rate of 1% above the bank base rate (this is usually much cheaper than high street banks) for a maximum of 5 years and must be secured against an asset of suitable value. What makes this even more advantageous is that interest payable by the company goes back into the pension scheme.

Tax-saving property ownership

A SSAS can invest in commercial/industrial properties. An effective way to utilise this benefit is by purchasing a commercial property for the company through the SSAS and then leasing it back to your company. The rent you pay as a limited company goes into the SSAS towards your pension fund, and you can reduce your corporation tax by accounting for the rent you have to pay as a business deductible.

How does a SSAS work as a pension scheme?

Similar to other pension schemes, when you contribute into your SSAS the government will also provide a top up. For basic rate tax payers, the government will provide a top up of 20% of your net pension contribution. For higher and additional rate tax payers, you receive additional tax relief on the amount you contribute into the scheme - which means the income that should be taxed at 40% or 45% (dependent on your tax band) gets taxed at 20% instead.

You can start accessing the funds from the SSAS at the age of 55. You have the option of either taking out 25% of the total amount as a tax-free lump sum, or receive 25% of each withdrawal from the fund tax-free. The actual amount you can receive is dependent upon how much you and your employer have contributed to the scheme, how long you’ve been putting into the scheme, and how much money the investments have made for the fund.

How Ridgefield Consulting can help with your SSAS

In order to set up and manage a SSAS there are a range of administrative tasks involved, including (but not limited to) registering the SSAS with HMRC, managing the online HMRC reporting portal, and maintaining scheme records for the trustees. If you’re thinking about setting up a SSAS and would like to discuss whether it is suitable for you, your business and retirement plans, please get in touch with us today.

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