| An
acronym standing for 'small self-administered scheme',
a SSAS can be an ideal retirement planning vehicle if
you are a Controlling Director or Senior Executive.
However, they are not applicable if you are self-employed.
In simple terms, a SSAS is
an occupational pension scheme that can be used for
less than 12 members. This method of saving for retirement
has been adopted very successfully by many small family
incorporated businesses. The SSAS has also proved
attractive to individual directors of larger companies,
being used to build up substantial funds which are
invested in a wide range of assets.
One-member SSAS
Another version of
the scheme called the 'one-member SSAS' is becoming
increasingly popular. It is particularly attractive
to the founders of businesses, owners and chief executives
with 50% of the equity.
There are other specific situations
in which the one-member SSAS could be appropriate
to you. For example, it is a possibility for a director
who is, say, aged 45, does not expect to remain with
the same company until the age of 65, and therefore
prefers to have his or her own, more portable arrangement
rather than joining a series of company schemes. Another
possibility is an Executive Pension Plan.
Attractive option
So, why are SSASs
so attractive to wealthier individuals? Well, one
of the reasons is that, although they are occupational
schemes, SSASs escape many of the investment restrictions
imposed on more conventional arrangements. In particular,
a high degree of self investment is permitted which
allows potentially greater fund growth and a greater
choice in where monies can be invested There is also
a loan facilty which means that, after an initial
two years, plan holders can borrow up to 50% of their
SSAS fund to invest in their own company. This can
be used to purchase the business premises, leasing
it back to the company. Transactions must be on commercial
terms.
Additional features
Another important
feature of the SSAS is the ability to invest in unquoted
companies, although these purchases are closely scrutinised
by the Inland Revenue. For those who want a conventional
pension fund portfolio, the investment choice is broad.
Moreover, SSASs can borrow substantial sums of money
and can therefore gear up their investment.
Tax-efficient growth
In addition to all
these benefits, there is tax relief on the pension
contributions and virtually tax-free growth within
the fund.
The contribution rules for
SSASs are more flexible than for personal pensions.
Maximum contributions are determined by an actuary
with reference to salary and service to retirement.
The employer's contributions
are tax deductible and are not subject to employer
or employee National Insurance. Where the employee
pays contributions, these are limited to a maximum
of 15% of salary - however, due to the National Insurance
break, SSASs are generally funded by the company alone.
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Various SSAS options at retirement
The benefits provided by a SSAS will depend
on the size of the fund at retirement. There
are restrictions for higher earners caught by
the earnings cap.
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A
maximum (taxable) pension of two-thirds of final
salary. |
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The
annuity purchase, to provide the pension, can
be deferred up to age 75. |
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Death-before-retirement
lump sum of up to four times annual remuneration. |
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Balance
of five years' pension payments may be paid as
tax- free lump sum on death after retirement where
a guaranteed annuity is taken. |
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Spouse's
and dependants' benefits may be included. |
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Substantial
tax-free lump sum on retirement (up to one-and-
a-half times final remuneration). |
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If you
would like to investigate how a SSAS could benefit
your retirement planning provision, please contact
us to arrange a meeting or use our online
advice service.
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