How does a SSAS pension work? The ABC of SSAS:
Let’s get to the bottom of it: how does a Small Self-administered Scheme (SSAS) pension work? Whether you have been invited to join a SSAS pension scheme or have questions about a scheme that you are currently part of, we answer some common questions below.
Who is a SSAS pension for?
A SSAS is an employer sponsored pension scheme designed to facilitate retirement saving for up to twelve people. Typically, these are directors or senior staff from the same company. However, family members of people already in the scheme are also allowed to join. All members of the SSAS must be at least eighteen years of age.
Who looks after a SSAS pension?
With a SSAS, all members of the scheme become member trustees. Investment choices are decided on jointly as a group, or by a nominated lead member trustee. You can appoint a professional SSAS trustee company to operate and administer the scheme on your behalf, but if you aren’t working with a professional firm,, you will need to appoint one of the member trustees to become the scheme administrator. This will involve several administrative duties such as fulfilling HMRC obligations, registering with The Pensions Regulator and sharing updates with other trustees about how the SSAS is performing.
How does a SSAS pension work?
A SSAS is a very flexible type of pension scheme. Unlike with other types of pension, trustees of the SSAS can choose to invest money from the pension pot into the sponsoring employer.. The SSAS can also lend up to 50% of the total value of the fund to the sponsoring employer as long as the borrower as sufficient assets to use as security for the loan
You can also invest in non-residential property, land, gilts and fixed interest stocks, investment trusts, funds and more. You can even buy your own office with the pension and lease it back to the company or a third-party.The final thing to note is that there’s no income tax or capital gains tax payable on investment returns as they remain within the tax efficient environment of the pension scheme.
How do you draw from a SSAS pension?
Once you reach the age of 55 you can choose to withdraw up to 25% of your share of the SSAS fund as a tax-free lump sum, but you do not need to do this immediately. You can draw the tax-free part in stages and over a number of periods. The remaining 75% of your pension will be taxed as income at your marginal rate of tax when you draw down from it. Read how to set up a SSAS pension here.
Make your SSAS work harder for your future
Here at Prydis we are experts in the provision, administration and management of SSAS pensions, with a Chartered Financial Planners designation to prove it. If you would like to find out how we could help you make smarter decisions for your retirement, get in touch for a no-obligation discussion – either over the phone or in person. We’re here to help.