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The Family SSAS

Flexible, tax-efficient family trust. The Family SSAS is a fantastic way to ensure ultimate tax efficiency. If the plan is to build the legacy, then a SSAS is a fantastic tool, for accruing assets and securing them for future generations.

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What is a Family SSAS?

A Family SSAS is a family pension trust, independently established for the benefit of its members. Members of the trust can be family members or also company members. The SSAS is a corporate pension and so regulated by HMRC and The Pensions Regulator, enjoying the same benefits as traditional benefits, plus much more. The Family SSAS pension is controlled by its members and so all investment decisions are at the discretion of the members of the SSAS. In the case of the Family SSAS, this means that the family is responsible for the fund and how the funds are invested. It also means that family assets, such as property and land, can be secured within the SSAS to ensure a legacy for generations to come. For families and small businesses, the Family SSAS is the ideal vehicle for wealth protection and succession purposes.

How does a Family SSAS work?

A Family SSAS must initially be established by a company director and registered with HMRC. Once established, other family members or key company employees may also be invited to join the trust, making it the perfect tool for family run businesses. The Family SSAS may have up to 11 members, who may also transfer in their pension funds if they wish to, creating a larger pooled pot. Members retain the percentage portion of the pot that they put in, as the pot grows. Funds may be invested at the discretion of the members.

Flexibility & Control

The Family SSAS is a unique and flexible pension with a very wide range of investment choices. Examples of popular Family SSAS investments include: the family business, commercial property, land, unquoted shares, gilts and property loans, and a much wider range of investment than usually available within traditional pension funds.

The Family SSAS is an asset that can be passed down through the generations and wealth secured.

What does a Family SSAS mean for you?

Much more flexibility & control than the traditional pension and retirement planning methods
Members retain their own portion of the fund and nominate their own beneficiaries
Unlike traditional pensions, the Family SSAS can be passed down through the generations
All in one trust for investment, security and succession purposes, making it easier to manage and more tax efficient, with increasing growth opportunity and reach
For family businesses, this adds additional security, flexibility and continuity possibilities, supporting the business as well as the family and member retirement plans
Cheaper, faster and simpler to manage ownership
Control over investment choices, which is beneficial both to the family and the business
The Family SSAS can invest in property, transfer assets and sell assets. This is particularly useful in the case of family businesses, property and land investment and ownership
Offers the ability to pool pensions for greater investment choice and reach and increased growth potential for all members

Put simply, the Family SSAS is a unique, tax efficient wrapper that protects your family wealth, allows you to create a robust succession plan for your family business and can benefit your family for many generations to come.

Building a legacy using a Family SSAS

With a successful strategy, a Family SSAS can keep growing and providing benefits for many generations. It is a facility to hand-down wealth and assets as well as ensure smooth continuation of the family company. As long as there are funds within the SSAS, it can continue to be passed down through the family. Beneficiaries nominated within the SSAS are entitled to draw benefits straight away, should a member die. They do not need to wait until they are at least 55. A SSAS is a great way to ensure ultimate tax efficiency. If the plan is to build the legacy, then a SSAS is a fantastic tool, for accruing assets and securing them for future generations.

Saving tax with a Family SSAS

As the SSAS is a family trust, beneficiaries of the trust can be nominated to receive the fund upon death of a member. In addition, The Family SSAS avoids the paperwork and legal fees often incurred as assets are handed down. For a business, assets and funds can be invested at the discretion of the trust members, meaning a tax efficient strategy can be employed, both when growing the fund and also when handing-down through the generations. In addition, The Family SSAS is a useful tool for business strategy and planning, ensuring that tax efficiency is optimised throughout.

An example of an efficient Family SSAS strategy

Background

John and his wife, Jean, are proprietors of a successful company. They have two sons, Tom and Tim, and are focused on planning for their retirement whilst ensuring a seamless transition of the business to their sons.

Strategic Actions:

Utilising a Small Self-Administered Scheme (SSAS):

Property Transfer: John and Jean decide to sell their business premises to their SSAS. The company then pays rent to the SSAS for the use of the premises. This rent is considered an allowable business expense, providing tax benefits, and the income received by the SSAS is exempt from income tax, facilitating the growth of the SSAS (i.e. pension funds).
Profit Reduction: The rental payments reduce the company’s taxable profits, thereby decreasing the year-end tax liability.
Family Asset Growth: Funds are effectively transferred from the business to the SSAS, ensuring that assets remain within the family.

Involving the Next Generation:

SSAS Membership: John and Jean invite Tom and Tim to join the SSAS. This inclusion allows for shared decision-making and prepares the sons for future business responsibilities.
Retirement Planning: Pension Drawdown: Upon retirement, John and Jean opt to draw 25% of their pension fund tax-free, spreading withdrawals over several years to optimise tax efficiency and preserve funds within the SSAS.
Funding Retirement Benefits: The rent received by the SSAS provides cash flow to support John and Jean’s retirement benefits as needed.

Enhancing the SSAS Fund:

Additional Contributions: With John and Jean no longer drawing salaries, the company reallocates funds to make additional contributions into the SSAS on behalf of Tom and Tim, promoting the growth of the pension fund.
Asset Appreciation: The business premises, now owned by the SSAS, appreciate in value, further increasing the fund’s worth. If the property is sold, the proceeds are free from capital gains tax.

Consideration of Inheritance Tax (IHT) Changes:

Recent legislative changes, brought in by the UK April budget in 2024 and fully effective from April 2027, have impacted the IHT landscape, specifically relating to SSAS pension schemes. Previously, SSAS benefits could be passed to beneficiaries free from IHT. Under the new rules however, death benefits from SSAS will form part of an individual’s estate for IHT purposes. However, speak to our advisers as there are plenty of strategies that can be integrated to overcome these new challenges.

Alternative Strategy: Establishing a Family Investment Company (FIC):

In light of the new IHT implications for SSAS, John and Jean consider establishing a Family Investment Company (FIC) as a complementary strategy, in addition to the SSAS.

Structure and Benefits:

Company Formation: A FIC is a private limited company where family members are shareholders. John and Jean can transfer assets into the FIC, such as cash or investments, in exchange for shares.
Control and Flexibility: As directors, John and Jean retain control over the company’s operations and investment decisions, while gradually passing economic value to Tom and Tim through share distribution.
Tax Efficiency: The FIC structure allows for potential mitigation of IHT, as growth in the value of the company can be attributed to shares held by the next generation, reducing the taxable estate of the parents. Additionally, corporation tax rates on retained profits within the FIC are generally lower than personal income tax rates.

Conclusion:

By adapting their succession and retirement planning strategies to account for recent IHT changes, John and Jean can effectively manage their estate’s tax liabilities. The establishment of a Family Investment Company offers a viable alternative to the SSAS, providing control, flexibility, and tax efficiency in passing wealth to future generations. It is essential to consult with experienced advisers to tailor these strategies to specific circumstances and ensure compliance with current tax laws.

This is just one example of how the Family SSAS can be used for succession planning, whilst still providing retirement benefits and business growth.

FAQs

What does SSAS stand for?

SSAS stands for Small Self-Administered Scheme. This is a corporate pension scheme that is managed by trustees of the scheme. It can be set up by company directors. Members of the SSAS can choose how their pension funds are invested. It gives all members of the SSAS scheme more control over their pensions.

What is a SSAS?

A SSAS is a pension trust that gives its members control of their pension funds and assets. A SSAS allows members to invest funds at their own discretion.

A SSAS has access to every type of investment that is allowed under rules set out by legislation, as with traditional pensions. In addition, a SSAS has additional investment privileges, such as investing in property or investing in your business, amongst other things. You can make permitted investments at any age; you do not need to be 55 to take control of the money in your pension.

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Who is a SSAS for/who can have a SSAS?

A Small Self-Administered Scheme (SSAS) is a pension exclusively for business owners/company directors. The company director sets up the SSAS and is then able to invite up to 10 other members to be part of the scheme. Members can be other company employees or family members.

Can I pay SSAS costs and fees from the SSAS scheme?

Yes. Fees and costs can be paid by the SSAS or by the company.

What are the tax benefits of a SSAS?

As a SSAS is registered with HMRC as a UK registered pension scheme, it becomes an extremely tax-efficient wrapper.
Sponsoring Employers are able to make contributions and receive upfront tax relief, saving corporation tax.
Assets held within the SSAS are free of Corporation Tax, Income Tax, Capital Gains Tax, and has decreased Inheritance Tax liabilities.
Personal and company assets can be transferred into the SSAS as contributions.
Commercial property held by the SSAS, for example, the company business premises, can grow tax-free within the SSAS whilst earning tax-free gains (rent) from the company, as it does so. Rent is not lost to a landlord.
When using the loanback facility, loan payments go back into the SSAS, as opposed to paying the bank. This then grows tax-free within the SSAS.
Additional family members can be added to the SSAS to create a tax-efficient family trust.
Family assets can be held within the SSAS are ring-fenced from creditors.

Are there any drawbacks to a SSAS pension?

There are no drawbacks to a SSAS pension. A SSAS gets all the same benefits as any other UK pension scheme, such as tax breaks, lifetime limits, drawdown age and 25% tax free cash at age 55, along with the new flexi-drawdown rules. A SSAS is the ultimate director’s, property and business pension.

Most people take little interest in their pensions but when they realise all of the benefits of a SSAS and how the money locked in a pension can be used by SME directors, small businesses and families, the SSAS pension suddenly becomes a very attractive tool to have as a part of your business plans.

How long does it take to set up a SSAS?

Timescales can vary, depending upon relevant checks and paperwork required. Requesting your pension transfer values and setting the transfers in motion quickly will help. It can take a number of weeks to register your SSAS with HMRC and ensure everything is up and running correctly.

Can I set up a SSAS as a family scheme?

A SSAS is an ideal tool for family businesses and as a family trust. HMRC rules allow family members to be invited to be members of the trust. Having a family SSAS is extremely useful for inheritance planning. With a family SSAS, tax efficiency can be optimised. As pensions are pooled, a family SSAS has great flexibility with regard to taking benefits at retirement and asset transfers. Assets can be held within the SSAS and taken as benefits or left in the SSAS as part of the legacy, as cash benefits are taken when a family member retires. For family businesses, the SSAS allows greater business continuity as family members retire or join the business.

What is the difference between a SSAS and a SIPP?

A SSAS is a corporate pension and can have up to 11 members
A SIPP is a personal pension and only for individuals
A SSAS is exclusively available to company directors
SSAS costs are charged per scheme rather than per member
A SSAS is its own individual trust and can make its own investment choices
A SIPP is regulated by the FCA and HMRC
A SSAS is regulated by HMRC and The Pensions Regulator (TPR)
A SSAS can loan 50% of its funds to the business
A SSAS can invest in commercial property
A SSAS can invest in hands-free residential property