For a number of years now Small Self-Administered Schemes (SSAS) have been seen as a poor relation to Self- Invested Personal Pensions (SIPP) on the grounds that they are more expensive, less flexible and more cumbersome to operate. However, nothing could be further from the truth and there are plenty of reasons to see SSAS as the retirement savings product of choice for the directors of limited companies.
A More Secure Legal Structure
A SSAS is a Trust established by a company. It is therefore a stand-alone legal entity and is ring-fenced from the company, the SSAS members, the SSAS provider and any other unconnected individuals. The funds placed into a SSAS are therefore protected from creditors or wrongdoers.
A SSAS allows the fund to be pooled where each member has a percentage of the combined investments, or assets can be earmarked to specific members. This can allow access to investments that one individual cannot achieve and can help to spread risk.
Passing Investments down Generations
Provided there are sufficient funds available to pay retirement and/or death benefits, certain assets such as commercial property or unquoted shares can be kept in the fund and passed to younger generations.
Secured Loans to Sponsoring Employers
Up to 50% of the SSAS fund can be lent to the contributing employer at an interest rate of 1% over bank base. A first legal charge over non-taxable property must be provided as security.
Shares in Sponsoring Companies
A SSAS can spend up to 5% of its fund on shares in a contributing company and shares in any number of sponsoring companies can be purchased up to a total investment of 20% of the fund.
Contributions do not have to be earmarked
As a SSAS is an occupational pension scheme, contributions paid by the employer do not have to be specifically allocated to members at the time of payment. By doing this there is no assessment against the Annual Allowance until allocation is formalised at a later date. Manipulation of the fund value between the members is therefore possible which allows strategies for withdrawing funds on retirement or death which are not available from a personal pension.
No Transfer Advice
An existing SSAS can be moved to another provider without effecting a pension transfer. It is therefore possible to access better administration, lower fees and funds under management without giving transfer advice.
Rescue Orphan Cases
At "A Day" on 6th April 2006, many SSAS and EPP cases either removed their Professional Trustee or were not supported by their insurance company and since then the client has acted as Scheme Administrator. Since that time many of these pension schemes have breached a host of regulations and are now in a position where they are unwittingly liable to HM Revenue and Customs’ fines and penalties. We can rescue these cases by being appointed as Professional Trustee and Administrator and carrying out a full scheme audit.
Conversion of EPPs
Thousands of single trust Executive Pension Policies can be converted to a SSAS by completion of a single trust deed. Funds can then be reinvested in line with a new investment strategy.
Protected Tax Free Cash
Under a conversion of an EPP to a SSAS, or appointment of a new Professional Trustee and Administrator, any protected tax free cash at A Day is maintained. This is not possible with a pension transfer unless it is on a bulk basis.
Fees are often lower for several members
SSAS have traditionally been considered as more expensive than SIPP. However, with the equalising of regulations and streamlining of administrative duties, this is often not the case and a SSAS with several members may be equal to or cheaper to operate than a group of SIPPs.
Fees can be paid by the Employer
Unlike personal pensions, a contributing employer can pay the fees for the operation of a SSAS. The fees are a deductible expense against Corporation Tax and allow the VAT to be reclaimed. In addition, where the employer pays the fees there is no consequent reduction in yield on the pension fund which can produce better performance.
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