Pension Practitioner.Com Blog

SSAS, Pension Schemes

Top benefits of a COMMON TRUST for SSAS members.

When a SSAS purchases a property on the behalf of its’ members, it does so as a single purchase transaction. It holds the asset in a non-allocated common trust. It is for the benefit of all members, in proportion to their share of the pension fund. The U.K. top rated SSAS provider’s, Pension Practitioner .com, stated that this differs from a SIPP, where each individual member owns a proportion of the property through their own plan. This becomes complex where members are related and benefits will be drawn at different times and there is no desire to sell the property to raise the cash in order to provide benefit payments.

A highlighted example is the scenario where, Mum and Dad wish to begin drawing benefits from the SSAS. Those benefits can be provided from other scheme assets, rather than selling a part of the property to younger scheme members, ie. the children. Pension Practitioner .com pointed out that with a collection of SIPPs, the children’s plans may have to purchase a greater share of the property from Mum and Dad’s SIPP, which is difficult or impossible if the children’s SIPPs require borrowing and they are at or even near to the stipulated 50% of the funds maximum borrowing limit.

It is not only family scenarios that prospers from SSAS flexibility of how benefits are provided. Pension Practitioner .com explained that if a director resigns from the business, whilst owning a part of the business property through their SIPP, the remaining scheme members being unlikely to want the property to be continued to be owned as an investment by a now unconnected individual. This does not arise with SSAS, as the former member whilst still a trustee, the expectation would be to make a cash transfer payment to a pension plan of their choice, severing their involvement with company and scheme affairs.

Pension Practitioner .com added further that one needs to ensure liquidity with SSAS, to provide retirement benefits, transfer values or death benefits. But as none of the scheme assets are earmarked to individual members, there is much greater flexibility over how payments are provided for and made. When an illiquid asset such as a business property is owned by a collection of SIPPs, there is a potential liquidity problem if any one of those SIPPs needs to make a payment of retirement, death or transfer benefits.

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