SSAS pensions – still alive and kicking for business owners

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When Self Invested Personal Pensions (SIPPs)  first became mainstream after Pensions A-day in April 2006, the future for SIPPs’ biggest competitor product – ‘SSAS’ – looked somewhat bleak.

The quick to set up and ‘fashionable’ SIPP looked like it could take over as the number one choice for company director’s pension needs.

SSAS is short for Small Self-Administered pension Schemes. They are generally set up to provide retirement benefits (and other options) for a small number of a company’s directors and/or senior or key staff.

Much has happened in recent years to both SIPP and SSAS pension products.

SSASs have come out of the shadows as a serious player for the owners of small business looking to buy commercial property to expand their operation and/or as a potential source of funding for the business.

But why the 'flip back' to SSAS from SIPP?

  • Cost: The more member/properties the more attractive a SSAS is. A SSAS can have up to 11 members. Generally, it is the same annual cost regardless of the number of members. A SIPP tends to charge for each member -the break-even point being 2-3 members. SSAS annual administration fees are generally lower.

  • Service: SIPPs are more of a volume market product. Merger and acquisitions have not improved SIPP service standards. SSASs tend to fair better, especially among the independent providers whom often have much more personal contact with clients.

  • Decision making: The larger SIPP providers are process driven. SSAS providers are usually quicker at assessing matters and giving an answer. When it comes to commercial property, SIPP providers may well want often unnecessary work such as environmental reports. With a SSAS the member trustees can make an informed decision.

  • Decision making: The larger SIPP providers are process driven. SSAS providers are usually quicker at assessing matters and giving an answer. When it comes to commercial property, SIPP providers may well want often unnecessary work such as environmental reports. With a SSAS the member trustees can make an informed decision.

  • Investment management: A SSAS operates on a pooled basis, this has a great deal of flexibility when dealing the liquidity of the scheme for paying benefits. The introduction of flexi access and dependants’ pensions has meant the SASS is seen as a useful addition to managing client’s wealth.

  • Control: As a SIPP member you are not a trustee, and all aspects of the running of the scheme, are made by these trustees. They set the rules of what they will allow even if it is not against any HMRC legislation. In a SSAS you are a Trustee, you are party to all documents.

    By contrast, SIPP providers may restrict the bank you can use (often they receive a cut of the interest earned), a SIPP may insist you use their panel solicitor and property insurance. In SSAS you can pick your own team to buy and insure a property.

  • Loanback: to the business, unlike SIPPs, a SSAS can make a loan-back (maximum 50%to a business. All loans must be made for genuine reasons of assisting the trade of the borrower and the loan must be used for this reason. For example, to aid the purchase of commercial property, purchase of stock, plant or machinery. First charges are required. Mind you, loans to keep ailing businesses afloat with cash flow are not allowed.

    The maximum amount of a loan which can be made to a sponsoring employer is 50% of the total amount of cash held and the net market value of the assets of the SSAS.

Hence, for some company directors whom own a small business and are seeking to upgrade or expand, the option of the loan facility of a SSAS or even the ability to invest in company shares, could mean setting up a company-specific SSAS is money well spent.

If you’re a business owner considering your pension options or wish to discuss anything in this article further, please don’t hesitate to get in touch by emailing us on urgent@wishartwealth.co.uk or call us on 01312262012.

Thanks to David Boyd of Monument SSAS in Glasgow for his assistance with this article. 

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