Run your own business? A SSAS could work for your pension

HOW DOES A SSAS WORK?

Run your own business?

A SSAS is initially established by an employer and is typically suitable for the Directors/Partners of the business and those who want to adopt a more entrepreneurial approach to their retirement planning. In addition, the Trustees can invite other individuals (e.g. family members) to join the scheme even if they are not employees of the sponsoring employer.

run your own business? run your own pnesion fund

Occupational (i.e. company sponsored) pension schemes fall into two broad categories:- final salary (defined benefit) and money purchase (defined contribution). A SSAS is a defined contribution scheme.

Funding

As with all pension schemes, HMRC limit the amount of tax relief given by limiting the contributions that can be made in respect of any member (known as the ‘Annual Allowance’). Currently this is £40,000 (per person). It is also possible to carry forward any unused relief from the previous 3 tax years, in certain circumstances – which could mean that some individuals have the scope to pay a much higher amount at the outset.

Since the 2016/17 tax year, the annual allowance may be tapered for higher earners. Individuals with an adjusted income of greater than £240,000 (since 2020/21, or £150,000 prior to this) may have their allowance reduced by £1 for every £2 in excess, to a minimum of £4,000 (or £10,000 in prior years), unless their threshold income is below £200,000 (£110,000 in years prior to 2020/21)

The maximum pension fund that can be tax efficiently accumulated, known as the ‘Lifetime Allowance’, was frozen in the 2021 Budget (for the 2021/22 to 2025/26 tax years inclusive) at £1,073,100 per person.

a pension is for life not just retirement

WOULD IT WORK FOR ME?

Entrepreneurs, in our experience, generally prefer to have a much greater element of control over all aspects of such schemes – in the areas of cost, asset selection, banking, accessing benefits and the involvement of other professionals.

There appears to be growing dissatisfaction and/or mistrust of insurance companies, the stock market and institutional control generally when it comes to pensions – this has arisen from poor investment performance, mis-selling scandals and high policy/advice charges in previous years.

Virtually all our clients who have set up SSASs have been highly delighted with the outcome. Furthermore, despite the recent Government restrictions on the ability to contribute to pension schemes there has recently been a renewed interest in setting up well funded bespoke arrangements, mainly because of the attraction of the wider investment opportunities, greater flexibility and control.

Other Conditions

HMRC monitor SSASs more closely than other types of pension scheme. As the trustees are often the controlling directors of the company and the sole members of the scheme, they are therefore in control of all financial aspects of both the company and the pension fund.

To ensure maximum investment flexibility and restrict compliance requirements to a minimum, normally all scheme members would be trustees and all of the trustees are required to make investment decisions unanimously, in writing.

This gives each member/trustee an effective veto over investment decisions and so directors tend to exercise great care in selecting who is invited to join their scheme.

Mattioli Woods have a specialist team which can provide all of the initial and ongoing advice required in relation to the establishment and operation of SSASs. We also provide a compliance and administration function to deal with the regulatory aspects of running your own scheme (including the various HMRC reporting requirements) therefore providing a ‘one stop shop’ for this specialist form of pension product.