A Small Self-Administered Scheme (or Member Directed Investment Scheme), otherwise known as a SSAS allows company directors to maintain control of their pension arrangements in a flexible and tax efficient environment. These Schemes are ideally suited for shareholding directors of small to medium sized limited companies (although are often also used by Partnerships). They are similar to SIPPs (Self Invested Personal Pensions) but do not require a third party provider as your Company sponsors the Scheme instead.
The Scheme is governed by a Trust Deed and Rules, is a separate legal entity from the sponsoring Company and is run by its Trustees.
Company contributions can be varied in line with profitability and there is no contractual commitment to pay any particular level of contribution.
There are various tax benefits available including:
- Contributions are allowable as an expense against corporation tax
- Investments accumulate free of income and Capital Gains Tax (CGT), and
- A percentage of the fund can be paid out as a tax free lump sum (known as a Pension Commencement Lump Sum/Tax Free Cash up to 25%) from age 55, or potentially all of the fund on death (up to your Lifetime Allowance)
There is no need to involve an Insurance Company or third party Administrator – with expert guidance you can run the Scheme yourself.
Administration fees are usually paid by the Company, which are tax deductible.
Flexibility and control can be maintained beyond retirement and/or sale of the Company, as pensions can be paid out of the accumulated Scheme assets, thereby deferring the purchase of an annuity indefinitely if appropriate.
SSASs have been designed to allow maximum flexibility with regard to your choice of investment strategy and the Trustees will be the legal owners of all assets held within your fund. Your SSAS can be invested in any of the following ways:
- Unlisted shares
- UK quoted stocks, shares, gilts and debentures
- Shares quoted on the Alternative Investment Market (AIM)
- Warrants, Futures and Options
- Permanent Interest Bearing shares
- Stocks and shares traded on a recognised overseas stock exchange
- Authorised unit trusts, investment trusts and OEICS (Open Ended Investment Companies)
- Insurance company funds
- Deposit accounts
- Commercial property and land
- Hedge funds
Certain categories of investment may result in tax charges. These include:
- Residential property and associated land from which you derive personal benefit
- Personal chattels (capable of private use)
- Loans to connected parties such as Scheme Members, their relatives and partnerships in which they are partners
If you wish to consider any particular asset that does not clearly fall into any of the allowable asset classes then full details should be discussed for clarification.
Unquoted shares
The Trustees can invest in unquoted company shares. Due to possible significant tax charges or complex restrictions imposed by HMRC, it is imperative to check the possible advantages of any proposed share purchase in advance with your Accountant and Solicitor.
Your SSAS can invest in the shares of the Principal (Sponsoring) Employer or other associated employers up to a limit of 5% of the fund value in any one such employer, and limited to 20% or less of the fund value in all employers. This limit applies whether the Principal Employer is a Limited Company, Partnership or plc. Care needs to be taken when investing in the Principal Employer as any share purchase may result in the SSAS owning unauthorised assets i.e. HMRC deem direct ownership of office equipment or vehicles owned by the Company to be unauthorised which would result in a tax charge.
Please note that if you are considering using a SSAS, you will need to take the appropriate professional advice pertinent to your own personal circumstances. Valius can put you in touch with a recognized specialist in the area of SSAS who can assist you in the first instance.
