6 Points of today’s SSAS
Many experts mistakenly announced the doom of the SSAS (Small Self-Administered Scheme) at pension simplification. With every piece of pension legislation announced, the cry went up. As so often when one follows the heard blindly, all were summarily proved wrong. The “why have a SSAS when you can have a SIPP,” has long since disappeared.
To date, with every every amended Finance Act, six significant differences stand out all the more.
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A SIPP is established and regulated by a person or body regulated by the FSA, whereas a SSAS is established by an employer and administered by the Pension Regulator.
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A SSAS may make secured loans back to the principal or connected employer of up to 50% of the funds net assets, for a maximum of five years. A SIPP with no principal or connected employer, cannot make loans to the members, his business or any other connected parties.
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Within the SSAS, the employer may dismiss any administrator. When it comes to acceptable investments, the SSAS provider must be as flexible as possible. If they run a restrictive list as many SIPP operators do, they cannot expect to remain as administrator or trustee for long.
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Within a SSAS, all assets are held in a common trust for all members. This means, the common trust can hold property for the benefit of members of the scheme. Every member has an ‘actuarial interest’ in the scheme, not in specific assets. Another advantage is that when members move on or die, assets such as property need not be sold. SIPPs are individual arrangements therefore hold individual assets in a plan for each member. When a change occurs, there is considerable upheaval. In some instances that means selling the property on the open market to satisfy the SIPP operator. This often turns out to be very costly and complex.
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Many SIPP providers are the sole trustee, which means they own the asset as opposed to each individual SSAS having it’s own trustee. This may include a professional trustee. The great issue with being a sole trustee, is, this can lead to conflict with members. This occurs when members’ wishes are in opposition to the risk management strategy of the operator.
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SSAS can offer scheme pensions at retirement. SIPPs are established under a master trust, with each member having a different policy within the scheme. This means the scheme pension option is not available to most SIPP members.
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