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Small Self Administered Scheme (SSAS)

A SSAS is a type of occupational pension scheme which is usually established (under trust) for the benefit of a business’s directors, partners, other key employees or family members. In common with SIPPs, SSAS are suited to groups of individuals (there can be no more than 12 in any one scheme) who wish to have control over their pension fund. Usually every member of the scheme will be a trustee, but as the rules governing what a SSAS can and cannot do are complex, most schemes utilise the services of an independent trustee who has a thorough understanding of the subject and HM Revenue & Customs’ (HMRC) requirements.

The contributions the business makes to the scheme on behalf of its members are treated by HMRC as a trading expense and as such, attract tax relief in the year they are made. Scheme members’ contributions will attract basic rate tax relief (claimed by the scheme itself); higher rate taxpayers claim the difference on their tax return. The returns on the scheme’s investments (other than dividend income) are not subject to capital gains tax or income tax.

Although the business can contribute as much as it can afford to the scheme, SSAS members are allowed to contribute 100% of their earnings each year, providing they total no more than the Annual Allowance for pension contributions, which for 2010/2011 is £255,000. Members are entitled to build up a pension fund equivalent to their lifetime allowance, which for 2010/2011 is £1.8m.

For inclusion in a SSAS, any and all securities must be approved by HMRC. The list below is not definitive and different SSAS providers will offer different investment choices.

  • bank and building society deposit accounts;

  • commercial property and land

  • Futures and options quoted on a recognised stock exchange;

  • gold bullion;

  • government securities;

  • insurance company funds;

  • investment trusts;

  • National Savings products;

  • stocks and shares quoted on a recognised UK or overseas stock exchange;

  • traded endowment policies;

  • unit trusts and OEICs

Although it’s not permissible to hold direct investments in residential property in a SSAS, it may be possible to do that via a collective investment vehicle such as a real estate investment trust or a property trust.

Loans of up to 50% of the current value of the scheme, less the value of any outstanding advances, can be made to the sponsoring employer, or an associate company, subject to conditions set by HMRC. This facility can prove attractive to enterprises that wish to purchase a freehold property to accommodate their business: the loan however must be secured on assets of equivalent value and seen to be arranged on realistic, commercial terms.

Having established a SSAS, if the business subsequently fails, the assets held within the scheme will not be available to creditors.