Small Self-Administered Schemes (SSAS)

A Small Self-Administered Scheme (SSAS) is an occupational pension scheme which is subject to the normal rules and regulations for registered pension schemes, but offers greater flexibility and freedom of choice over the types of investment it can make.

There are also generous tax concessions afforded to a SSAS which are advantageous to both a company and its directors. These can be used to develop a highly effective and coordinated approach to minimising corporate and personal taxation.

SSASs are generally set up to provide retirement benefits for a small number of a company’s directors and/or senior or key staff. They can be open to all employees and their family members, even if they don’t work for the employer. The number of members is generally limited to 12. Contributions may be made to the SSAS by the members and/or the employer. Each receives tax relief on contributions made, subject to certain conditions.

Most types of conventional investments are freely permitted including quoted stocks and shares, unit trusts, insurance policies, commercial property and employer related investments or loans, but there are some restrictions designed solely to prevent abuse.

Any SSAS holding prohibited assets directly or indirectly will have all tax advantages removed which will broadly mean that it is at least no more advantageous to hold such assets in a pension scheme than it is to hold them personally. Prohibited assets include direct or indirect investment in residential property and certain other assets such as fine wines, classic cars, art and antiques.

The trustees of a SSAS may make loans to the employer, but not the members, subject to certain conditions being met. A SSAS is able to borrow for any legitimate purpose intended to further the aims of the scheme.

To be eligible to invest in a SSAS and receive tax relief on personal contributions, an individual investor must be under 75 years of age, and resident in the UK (there are some exemptions for individuals who work for the UK Government or have left the UK in the last few years).

Contributions can also be made by your employer or a third party e.g. parent or spouse. The minimum contribution will vary between providers but is usually around £20 per month, and these can be stopped and started at any time.

Given the many tax advantages that are available with regard to funding a personal pension there are limits to the tax-relievable contributions that can be paid. Individuals are able to make contributions of up to the greater of £3,600 or 100% of their annual earnings to all of their pensions each tax year and receive tax relief on them.

There is also an annual limit on the total amount of pension contributions that each person can make without incurring a tax charge (this includes employer and employee contributions). This is called the annual allowance. Where the total employer and/or employee contribution exceeds the annual allowance a tax charge will apply.

It may also be possible for contributions in excess of the Annual Allowance to be paid in some circumstances under the rules which allow unused Annual Allowance from the three previous tax years to be brought forward and added to the current year’s Annual Allowance.