Since the mid-seventies, Directors of a limited company or Partners in a business (the Sponsoring Company) have been able to establish Company Pension Schemes which give them control over their investment. Known as a Small Self-Administered Scheme (SSAS), such a Scheme continues to be the most flexible and popular pension arrangement for Shareholding Directors and Stakeholding Partners.
Click here for more features of SSAS
How is it set up?
A Small Self-Administered Schemes is established with a Trust Deed and Rules – the Directors select the Members, who are usually also the Trustees. Wensley-Mackay provide the Professional Trustee service to help you set up and run the scheme.
The Trust Documentation and the Rules of the Scheme must be in accordance with the requirements of HMRC which registers each Scheme and grants Tax Exempt status.
The Sponsoring Company makes contributions on behalf of the Members. Contributions are treated as a trading expense, thereby attracting Corporation Tax Relief. Unlike other pension arrangements, there is no contractual requirement to make regular contributions. This means the Sponsoring Company may make contributions when profits and cash flow allow. The contribution should not exceed the Maximum Contribution Annual Allowance in order obtain Tax Relief.
Perhaps the greatest benefit to the Members is the ability to control investments. In addition to quoted equities, gilts, collective investments (OEICs, Unit Trusts, Investment Trusts etc) and cash deposits, authorised investments include Land and Commercial Property (which may be leased back to the sponsoring company).
The Scheme Trustees may borrow up to 50% of the net asset value of the Scheme.
The Trustees may also advance a secured loan at a commercial rate of interest to the Sponsoring Employer.
Most assets and investments within the scheme have no tax liability. For example bank interest and rental income are exempt from tax; also commercial property within the scheme is exempt from Capital Gains Tax on the ultimate sale. However tax credits from dividend income cannot be reclaimed.
Taking your Pension
From age 55 (or age 50 until 5th April 2010), the Member may commence taking a pension relevant to the value of the scheme investments and assets. As with any other pension, the Member may also take a maximum Tax Free Cash Lump Sum of 25% of the fund value.
For an example of the tax advantages of purchasing Commercial Property through a SSAS scheme visit the property section of this site.