SSAS Pensions Explained
The Small Self-Administered Scheme or SSAS pension plan is a form of workplace pension that is independently managed by the firm that sets it up. The pension plan doesn’t need any interactions with insurance firms or financial institutions.
It’s usually set up by the directors and other senior executives of a firm to offer more substantial retirement benefits and significant investment flexibility, As a member of an SSAS pension plan, a company has the freedom to decide how their pension funds will be invested, and they can also use their SSAS finances to invest in the company – they’ll be their own investors. Isn’t that the dream?
Small Self-Administered Scheme Pensions And How They Work
Let’s take a closer look:
A small self-administer scheme pension protects you from the fluctuating state of financial markets but has some drawbacks to it as well. It also offers more flexibility than a private sector one does in terms of transferring benefits even if your employer moves into or out of the public sector.
This type of retirement plan is sometimes called an occupational pension because it needs to be offered through an organization such as a trade union, professional body, friendly society, club, or other association
SSAS Pension Rules
SSAS pensions are mostly popular with small or family-managed businesses, and they’re a form of defined contributions pension scheme that’s available to the staff of a firm and their family members. That might include those who aren’t part of the firm directly but are related to a staff member.
Here’s an interesting fact:
As per the SSAS pension rules, only one SSAS pension scheme is permitted in every firm, and the firm membership is capped at 11 persons. A Scheme Administrator manages the Small Self-Administered Scheme accounts and its trustees who are 90% shareholders of the pension scheme.
The HMRC1 (Her Majesty’s Revenue & Customs) SSAS rules and regulations enable a member to invest in a myriad of asset funds, including commercial estates. The pension plan can also provide commercial mortgages or loans. It can therefore offer a loan to the firm to buy an asset like a new building through a mortgage, for instance, provided that it’s for investment purposes exclusively,
The Tax Benefit of SSAS Pensions
Any contributions that firm members make to an SSAS pension scheme are entitled to tax relief. The basic rate taxpayers receive is a 25% tax add-on, meaning that the HMRC includes £25 for every £100 you contribute to your pension plan.
If you contribute a higher rate, you’ll have the right to claim an additional tax relief amount via your tax returns. The contributions that are paid into the pension plan by your boss also qualify for some tax relief, and that can assist in reducing its total tax liability.
Cashing in A SSAS Pension
If you’re a member of the SSAS pension plan, you can start receiving benefits when you reach 55 years. Like all private, personal, and workplace pension schemes, you have the opportunity to choose to take the first 25% from your pension savings as a tax-free lump sum or get 25% for every withdrawal, untaxed.
The number of benefits you’re eligible for will be dependent on the amount you and your boss have paid into your pension scheme. It’s also based on the amount of time each contribution has been invested and how these investments perform.
After receiving your tax-free amount, every other withdrawal will be subject to the standard income tax rate. You can opt to take your pension scheme as an income either through buying an annuity or through income drawdowns.
Got Questions? Check These First
What’s A SSAS Pension?
The Small Self-Administered Scheme or SSAS is set up to offer retirement benefits to a small number of a firm’s directors or senior staff. The pension plan is open to all personnel ad their family – including those who don’t work in the firm.
As long as you’re related to an employee, then you might also be eligible for the SSAS pension. The number of members of an SSAS pension is, however, limited and should be no more than 11 individuals.
What’s the Difference Between A SSAS and A SIPP?
A SIPP is a form of defined contributions pension scheme that enables you to select your own investment. Nonetheless, if you don’t have the time to manage the assets, you can employ a money manager to handle all the investment decisions. When you decide where to invest your cash, you can choose from options like stock, shares, bond, policies and trusts.
SSAS pensions, on the other hand, is a form of workplace pension that’s independently managed by a company that establishes it. The pension scheme is set up by the firm’s directors and other senior staff to provide better pension benefits and flexibility.
What Can A SSAS Pension Invest in?
Well, there are several investment options that members of an SSAS can make. These include:
- Agricultural land
- Investment trusts
- Commercial land
- Industrial or retail units
- Direct quoted equities
- Regulated collective investments like OEICs, Unit Trusts, Mutual Funds and ICVCs
- Commercial estates
Gilts and fixed interest stocks
What Happens to Your SSAS When You Die?
When you pass on before reaching 75 years, any pension savings left in your SSAS account can be offered to your beneficiaries in the form of a lump sum payment. If the lump sum amount is paid within two years after you passed on, it can be offered to your loved ones free of income tax.
The SSAS Pension Scheme is a government scheme that will help people who are not eligible for the CPF pension to save towards their retirement. This article has given you an overview of how it works and what benefits those enrolled in this scheme can expect when they retire.