If you’re the director of an SME business then did you know that you could be using your former employee or private pensions to support and invest in your business or property!? If this isn’t the case then you might be surprised to learn that you could potentially be missing out on some significant tax benefits as a result.
A company SSAS gives directors immediate control over former, and existing, pension funds which can be invested in their business or in property.
This is not new; the company SSAS, ‘Small Self-Administered Scheme’, has been around for over 30 years, first introduced by HMRC as a pension scheme, tailored and exclusively available to SME business owners. It has similar traits to its cousin, the SIPP, but offers its members far more control and flexibility.
What is a SSAS pension
Equally unfamiliar is how cost effective they are to set up, flexible and tax efficient. With a SSAS, you are totally in control. This is often the reason that the SSAS pension is not promoted as a firm favourite amongst some financial advisors. Offering company directors control over their pension funds and investments isn’t necessarily well aligned with some IFA business models. Usually, they are in control of the fund and a fee is charged for this service.
For SME owners, the tax and investment benefits of the SSAS are potentially significant. As with all pension schemes, there are options such as taking a tax-free lump sum and an income in retirement. However, with the SSAS pension there are additional benefits available.
To be able to buy and hold commercial property and land within a SSAS is a potentially attractive draw, also adding security and tax benefits. Assets are sheltered for future generations within the SSAS and are protected from inheritance tax.
The ‘loanback’ is another unique feature of the SSAS that many SME directors are often unaware exists. This offers the ability to make a loan of up to 50% of the value of your pension, to your company for any use. For example, you could use the funds in your pension for stock acquisition in your company, or if needed, a simple capital injection.
A SSAS provides the key essentials of wealth management and business growth; the flexibility and control over money in your pensions for immediate use today, regardless of your age.
The ability to set up a company SSAS pension is exclusively accessible to those who operate as directors of their own limited, trading companies. Once established, a SSAS pension can invest in all the areas allowable through a traditional pension scheme, such as stocks and shares, commodities, corporate bonds and gilts as well as giving the members vast additional powers and opportunities.
How a SSAS pension works
Up to 11 members can be invited to be a part of the company SSAS, such as other directors, senior executives or family members.
Members of a SSAS pension act as trustees (Member Trustees) of the scheme. This is usually alongside corporate or professional trustees, appointed by the scheme to ensure that any transactions made by the pension scheme adhere to HMRC rules and regulations. This is extremely important to help you avoid potentially significant tax penalties.
With all the flexibility and opportunity that this type of pension offers, some might be forgiven for thinking that this would be a higher cost option, but this simply is not the case. Not only is the ability to make money enhanced and the tax benefits unrivalled; administration, management and other fees are charged on a fixed basis rather than traditional percentage charges. This means there’s potential to achieve savings.
