SSAS Pensions simplified

A Lifetime Business Tax Plan is a packaged solution, exclusively for company directors, that enables them to solve multiple problems for their business and offers tools to:

• Solve the immediate threat of a 40% tax penalty on surplus company cash
• Transfer in company and pension cash to create significant liquidity
• Protect family wealth and assets
• Secure inheritance of company shares
• Achieve wider investment choices in a low to zero tax plan
• Create lifetime and beyond tax and inheritance strategies
• Fund your business
• Create succession plans
• Grow the retirement fund
• Invest in property

Lifetime Business Tax Plans encompass two major components; the Family Investment Company and the Small Self-Administered Scheme (SSAS). These exclusive tax mitigation plans also allow directors to transfer in former work pensions that are frozen or unmanaged. The transfer of company cash and former pension cash into one plan can create significant liquidity, providing wide investment choice in a low to zero tax plan.

Yes, because legislation has created the components.

• The Family Investment Company is recognised by HMRC as a standard way of preserving family assets for future generations whilst mitigating any tax.
• A company tax-exempt savings account, technically known as a SSAS (Small Self-Administered Scheme), is also recognised by HMRC as a standard form of investment savings vehicle for a company.

Both of these essential components of the Lifetime Business Tax Plan need to be registered with HMRC and annual compliance reporting is required to notify them of the assets held and the returns generated, albeit no tax will be due.

Contributions can be paid in as a lump sum or regular contributions. Employer contributions can also be made.

Yes. This is just one of the great advantages of a SSAS pension. Consolidating your current pensions has many benefits, such as increasing your investment funds and choices, reducing costs as there is then only one set of fees/charges, and making your pensions easier to monitor.

An important question that many ask is ‘What happens if a member of a SSAS dies?’ Family members (and other dependants) can access the funds in a Small Self Administered Scheme (SSAS) if the member of the SSAS dies, but there are restrictions. It’s possible for a lump sum to be paid to a nominated beneficiary completely tax free, making an SSAS an excellent inheritance planning tool — if used properly.

However, this depends on specific circumstances, including whether or not the member has started drawing funds from the SSAS and how old the SSAS member was when they died.

Family members will be able to access a SSAS if a member dies before drawing the funds. The simplest option is to pay a lump sum to a person nominated in writing. Lump sums are typically free from all kinds of tax, including inheritance tax, income tax and pension tax. There is however, an exception: If contributions are made to the SSAS in the two years prior to death, as an attempt to reduce the SSAS member’s estate, this money may be liable for inheritance tax.

Alternatively, the amount can be paid as pension income to a dependant. In this case, income tax must be paid on the amount and the recipient must be a dependant.

If the SSAS member dies before drawing funds and was over 75, the benefits are paid out as if from a drawdown fund.

A lump sum paid out from a drawdown fund is taxed at 55%. You can pay anyone nominated in writing from a drawdown fund.

Money from a drawdown fund may be paid as income pension to a dependant as normal, which would be subject to income tax.

If you have no surviving dependants, the money from a drawdown fund may be paid to a nominated charity, without any tax deductions.

The Lifetime Allowance is a limit on the amount that can be taken from a pension scheme, either as a lump sum or as retirement income, and can be paid without triggering an extra tax charge. The amount drawn from a SSAS — or paid as a lump sum to a beneficiary — is tested against the lifetime allowance. For the tax year 2023/24, the lifetime allowance in the UK is £1,073,000.

Previously, you would have had to pay a charge on any pension savings over this amount. However, in April 2023 the charge was removed, and the lifetime allowance is set to be completely abolished by April 2024.

Each scheme will have a different arrangement in place in the event a member of the SSAS dies while drawing their pension. It’s possible to arrange a lump sum, a continuing pension income for a fixed time, or a dependant’s pension.

If a lump sum payment is arranged, this will be taxed at 55% and is limited to 20 times the amount of the original pension (minus the amount already paid to the SSAS member).

A dependant’s pension can only be paid to someone who is a dependant of the SSAS member who died. A dependant may be a spouse, civil partner, common-law partner, a child aged 23 or under, anyone financially dependent on the SSAS member, or anyone who is dependent on the member due to physical or mental impairment.

A dependant’s pension is not tested against the Lifetime Allowance, but it is taxed at the appropriate rate of income tax to the recipient. A dependant can draw their pension in a number of different ways, including a capped drawdown, a flexible drawdown (only if they qualify for the scheme in their own right), a scheme pension, or a lifetime annuity.

A lifetime annuity is a product that you can buy with your pension fund, which guarantees an income for life. If you’re a member of a SSAS and you’re drawing funds, you can use these funds to purchase an annuity. However, it’s vital you carefully check the terms of the annuity. When the recipient of an annuity dies, a lump sum may be paid to a dependant or there might be a minimum term of payments from the annuity to a dependant.