Small Self Administered Schemes (SSAS)
Introduction > > Small Self Administered Schemes
This term is now redundant in its technical pre-April 2006 sense, although it is expected to continue as a marketing/descriptive term.
What you need to know post April 2006 if you have an existing contract of one of these types.
It will continue as an Arrangement, (type subject to scheme details), and you/your employer can invest as much as you like, subject to the Annual and Lifetime Allowance rules.
Investments, Borrowing, Anti-Avoidance- new rules are a little different, discuss with your Financial Adviser, especially if your scheme has any existing property or moveable assets, or wishes to enter into a connected persons transaction.
The information below relates to pre-April 2006.
These are a special type of pension scheme with very wide powers.
They are only suitable for people who own or control the business.
SSAS schemes have three key powers of interest to the businessman: -
- The ability to make loans to the sponsoring company.
If the scheme has the funds, it can make an investment decision to loan money to the company that set up the SSAS. There are rules governing such loans, but in essence a SSAS fund can be treated as a very friendly bank. Of course if the company fails, then the pension will take a hit, (as it will have to write off the debt).
- The ability to invest in commercial property.
Should the company choose to do so it can buy commercial property, and rent it out. It can let it to the company that set up the SSAS. This creates a highly efficient structure where the company pays (tax deductible) rent to its pension scheme (which means that in effect the company owners are paying themselves, via a tax benefit).
- The ability to treat the entire fund as a non earmarked pool.
This sounds arcane, but it means that instead of each member being considered to have a personal fund of their own, all that matters is the fund as a whole. In practice is mainly serves to allow for a flexible approach in succession planning.
Imagine a fund of £600,000 and three members (a father and two children, who all work in the business) and who, on a contributions basis, are entitled to £200,000 each. However, because the funds are NOT earmarked, it is possible for the children to say "Look, Dad, we'll let you have £400,000 of the pot so that you can retire" (Precise details are subject to the maximum benefits allowable under HM Revenue and Customs Rules).
General Anti-Avoidance Rules – the Government knows that a SSAS is a very powerful tool, and it does not want it abused. There are quite a few detailed rules designed to prevent the powers being abused and it is important to talk with your financial adviser each time you wish to use any of the SSAS powers.
SSAS summary - a financial and tax-planning tool of great benefit to any profitable company controlled by its owners(s), where there are sufficient surplus resources to develop a fund of sufficient size to be useful as a lender, a property buyer, or in succession planning. SSASs are occupational schemes for up to 11 members, normally directors of small companies. They are administered by a trustee and there is no necessity to use an insurance company, as the investments are held in the name of, and managed by, the trustees. There are certain benefits for the company and the members in such a scheme, though the administration is strictly monitored by the HM Revenue and Customs to ensure compliance with the rules. Normal cashflow loans cannot be made, but loans for capital investments might be allowed, dependent on HM Revenue and Customs approval.
Last updated on July 21, 2006