SSAS Pension | December 2023

A Small Self Administered Scheme (SSAS) is a type of UK pension scheme used primarily by company directors, senior employees and family members. 

SSAS pensions offer flexibility and control over retirement investments, providing members with the ability to personalise their decisions. Conversely, it is necessary to note that they require active management and an understanding of risks.

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Understanding SSAS Pension Schemes

The SSAS pension is a type of defined contribution pension scheme. It is different to other pensions because it allows a small group of people, usually up to 12, to establish and run their own pension scheme. 

The members have the authority to make personal investment decisions, hence the term ‘self-administered’. 

This scheme is registered with HM Revenue and Customs, meaning it provides the same tax benefits as other registered pension schemes. It is primarily set up by businesses, allowing directors to make personal pension contributions and enjoy tax relief. 

Although SSAS pensions are not as commonly known as personal or workplace pensions, they offer a significant amount of control over your pension fund. 

The scheme’s assets may be invested in a myriad of ways, such as commercial property. The rental income from such investments goes directly into the scheme, further enhancing the pension pot. 

An SSAS pension scheme can borrow money for investment purposes. This is generally limited to 50% of the scheme’s net value. 

It can also lend money to the sponsoring employer, offering commercial loans that can help to grow the business while benefiting the pension scheme.

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How Does a SSAS Pension Work?

An SSAS pension works by pooling contributions from scheme members into a single, shared pension fund. The members are often company directors or family members. They are then provided with the freedom to decide how these funds are invested. 

This can include a wide range of assets, from stocks and bonds to commercial property and loans to the sponsoring employer.

Once they reach the age of 55, the scheme members can then start drawing benefits from the SSAS. This can include a tax-free lump sum and a regular income, which is subject to income tax. 

The amount of income received will depend on the size of the initial pension pot and the investment performance.

If a member of the scheme dies before drawing all their benefits, the remaining fund can be passed on to their beneficiaries. This can be received either as a lump sum, or as a regular income. 

The tax treatment of these benefits will depend on the age of the member at death and how the benefits are taken.

Although an SSAS pension is a great tool for retirement planning, it still offers complexities which require active management and a good understanding of investment risks. 

Therefore, it’s always recommended to seek guidance from a professional adviser before setting up an SSAS pension.

Benefits of an SSAS Pension 

There are a variety of benefits to enjoy with an SSAS pension. One of the primary advantages is the ability to draw a tax-free lump sum from your pension pot, once you reach the age of 55. This can be up to 25% of the total value of your pension fund. 

Another significant benefit of an SSAS pension is its generous tax relief on contributions. For instance, scheme members, including basic rate taxpayers, can have up to 20% tax relief on their personal contributions. 

You can claim further relief through your tax return if you are a higher and additional tax payer. 

The flexibility of investment choices is another bonus of SSAS pensions. Scheme members can invest in a range of assets, including commercial property, shares, and bonds. 

The rental income earned from properties and dividends from shares can further boost the pension pot contributions. 

SSAS pensions can also provide an effective way to plan for inheritance tax if that is relevant to you. 

Upon the death of a member, the remaining pension fund can be passed on to any nominated beneficiaries. This is typically free from inheritance tax, maximising how much money you receive.

Setting Up an SSAS Pension 

They are a few key steps to understand when setting up an SSAS pension. An establishment fee is needed initially to set up the scheme. 

This is then followed by an annual administration fee for the ongoing management of the scheme. Alternatively, these fees can be offset by the tax benefits gained.

Whilst setting up the scheme, you must establish a trustee bank account. This is because all the pension contributions, transfer-ins, and investment income will be held in this account. 

It is important to note that all scheme members are trustees and have equal control over the investments. 

The process of transferring existing pensions into an SSAS is straightforward. Most types of pensions can be transferred, including defined contribution pensions and some types of defined benefit pensions. 

However, it’s recommended to source specialist advice before transferring, as it may not always be the best option. 

Once you have an SSAS set up, scheme members can then start making contributions. These can be personal contributions or employer contributions. 

The latter can be an efficient way for businesses to extract profits, claiming corporation tax relief on employer contributions.

"SSAS pensions offer flexibility and control over retirement investments, providing members with the ability to personalise their decisions."

Managing Your SSAS Pension 

Active involvement from the scheme members is needed to manage an SSAS pension. They will need to make informed investment decisions to ensure the growth of their pension pot. Remember that investment options can be explained by an independent financial adviser. 

It is necessary to carry out reviews of the scheme’s assets on a regular basis. This can help to ensure that the investments are performing well and the scheme is on track to provide the expected retirement benefits. 

If any investments are underperforming, scheme members can review this and decide to sell them, investing elsewhere if required. 

While managing the scheme, members need to be mindful of the annual allowance. This refers to the maximum amount that can be contributed to the pension each year while still receiving tax relief. If the annual allowance is exceeded, you can face a tax charge. 

You are able to make withdrawals from the age of 55. Members of this age will be able to draw a tax-free lump sum, usually up to 25% of their pension pot. 

The remaining fund can be used to provide a taxable income for life. However, it is important to note that this is subject to income tax.

How Does a SSAS Pension Work

Risks and Regulations of SSAS Pensions 

Much like any investment, SSAS pensions come with risks. Depending on market conditions, the value of the scheme’s assets can go down as well as up.

If the scheme invests heavily in the sponsoring employer’s business, it can be risky if the business doesn’t do well financially.

The Pensions Regulator, HM Revenue and Customs in the UK regulate SSAS pensions. They are there to ensure that the schemes are run correctly, and that the necessary reporting is done. 

If the regulations are not followed, the scheme may lose its registered status, leading to significant tax charges.

There are also potential risks related to the scheme’s investments. For instance, If the scheme invests in commercial property, this could be affected by property market downturns. 

Similarly, if the scheme lends money to the sponsoring employer, it could lose out if the business fails.

Finally, you may need to consider potential exit fees. For example, If a member decides to leave the scheme or transfer their pension elsewhere, they could face exit fees. These are charges for withdrawing your pension or transferring it to another provider.

Tax Implications of SSAS Pensions

One of the most enticing aspects of SSAS pensions is their tax efficiency characteristic. The tax benefits of these small self administered schemes start with the tax relief on contributions. 

Both personal and employer contributions to the SSAS are eligible for tax relief, significantly reducing the real cost of saving for retirement.

On the flip side, there are no capital gains tax liabilities on the growth of investments within the SSAS. This means that the growth of SSAS assets remains untouched, whilst the entire growth can be reinvested to generate further returns. 

This tax-free development of funds is a major benefit, often making SSAS pensions a desirable proposition for savers. 

Another appealing tax benefit of an SSAS pension is the option to take a tax-free lump sum at retirement. Once a member turns 55, they can start drawing benefits from their SSAS pension. This can include a tax-free lump sum, typically up to 25% of the pension pot.

Tax efficiency continues even after the member’s death. The remaining SSAS pension funds can be passed onto nominated beneficiaries, usually without the charge of inheritance tax too. 

This offers the opportunity for efficient estate planning, ensuring that the member’s hard-earned savings can benefit their loved ones.

SSAS Pensions and Businesses

Small self administered pension schemes are particularly suited to business owners and senior executives. This is usually due to them offering a notable amount of flexibility and control over investments. 

This control of choice extends to the ability to invest in the member’s own business, a unique feature of SSAS pensions.

One way you can invest is by purchasing commercial property. The SSAS can acquire business premises, then lease them back to the member’s business. 

This provides a steady rental income for the pension fund,  as well as offering cash flow benefits for the business itself.

SSAS pensions can also support business through commercial loans. For example, the SSAS can lend money to the sponsoring employer, offering commercial loans that can help the business to grow. 

This is a win-win situation as the loan interest paid by the business boosts the pension fund, whilst also providing needed capital for their business.

However, it should be noted that there can be strict rules around these types of investments to avoid conflicts of interest and ensure that the pension fund is not put at risk. 

Therefore, it’s crucial to seek advice from a pension wise or a financial adviser before making such investments. This allows you to make the best educated decision.

Transferring to an SSAS Pension

Although transferring an existing pension into an SSAS can be a straightforward process, it’s important to understand the potential implications and seek professional advice. 

Luckily, most types of pensions, including defined contribution and some types of defined benefit pensions, can be transferred into an SSAS pension. 

An appealing aspect of SSAS pensions for most people, is the opportunity to transfer existing pensions over and the increased control over investment decisions. 

The scheme members have the freedom to decide where their pension fund is invested, an autonomy not often found in other types of pension schemes.

It’s worth noting that a transfer to an SSAS could potentially result in higher returns, due to the wider range of investment options. 

However, it also comes with increased responsibility and potentially higher risk. This is because the scheme members are responsible for managing the investments themselves.

It is crucial to understand any potential charges or exit fees associated with exiting the pension before you decide to transfer. These could significantly decrease the value of the pension pot, meaning that they should be factored into the decision-making process.


1. How does a tax-free lump sum work in an SSAS pension?

When you reach the age of 55, you have the option to start drawing benefits from your SSAS pension. One of the primary benefits you can take advantage of is a tax-free lump sum. This is typically up to 25% of your pension pot and it’s entirely free from tax. 

The remainder of your pension pot can be used to provide a regular income in retirement. However, this income is subject to income tax, with the rate of tax you pay depending on your overall income in each tax year. 

2. Is an SSAS a registered pension scheme?

Yes, a Small Self Administered Scheme (SSAS) is a type of registered pension scheme, meaning it is registered with HM Revenue and Customs (HMRC). 

Therefore, it is subject to the standardised rules and regulations that other registered pension schemes face. This includes the same tax benefits, such as tax relief on contributions and tax-free growth of investments within the scheme.

Being a registered pension scheme also means that the SSAS is regulated by The Pensions Regulator. They ensure that the scheme is run correctly and that the necessary reporting is done.

Therefore, the scheme can lose its registered status and face charges if it does not comply with the regulations.

3. Can an SSAS pension offer commercial loans?

Yes, one of the appealing advantages of an SSAS pension is the option to offer commercial loans. The SSAS can lend money to the sponsoring employer, providing a beneficial way to support the business while growing the pension fund. 

The loan must also be repaid with interest, offering a steady return for the pension scheme.

However, it should be noted that there are strict rules surrounding these loans, ensuring that the pension fund is not put at risk. 

For example, the loan must be secured, typically on an asset of the business, and the interest rate must be at least 1% above the average base lending rate of high street banks. 

There are also limits on the amount of money that can be lent, which is generally up to 50% of the net value of the scheme’s assets.

4. How does offering commercial loans benefit the SSAS pension?

When an SSAS pension lends money to the sponsoring employer, it is very often a win-win situation. This is because the business gets to receive the capital that it needs to grow, potentially increasing the profitability of the company. 

Alternatively, the SSAS benefits from the loan repayments with interest, which are paid into the pension fund.

The interest rate on the loan is typically higher than what could be achieved through traditional cash deposits, meaning that this is often an effective way to boost the growth of the pension fund.

 However, it’s important to remember that this type of investment comes with risks. If the business fails to repay the loan, it could impact the value of the pension fund.

5. What happens if the company fails to repay the commercial loan?

If the sponsoring employer fails to repay the loan, there can be serious implications for the SSAS pension. This is because the pension fund could lose a significant amount of money, potentially impacting the retirement benefits for the scheme members.

However, all loans made by the SSAS must be secured on an asset of the business. This means that if the business fails to repay the loan, the asset could be sold to recover the money owed to the SSAS pension. 

Unfortunately, the sale of the asset may not cover the full amount of the loan,particularly if the value of the asset has fallen since the loan was made. However, it can provide a contribution.

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