What is a SSAS pension?

SSAS pension stands for 'small self administered scheme' and is a type of defined contribution pension that an employer can self-manage for less than 12 members. Typically a SSAS pension scheme is set up by the directors of a business to gain more control over how their pensions are invested.

SSAS pension explained

SSAS pensions are a type of workplace pension which can be independently managed by the company that sets it up. It doesn’t require any interaction with financial institutions or insurance companies and is usually set up by directors and senior staff to provide increased retirement benefits and greater investment flexibility. Members of an SSAS pension can choose how their pension savings are invested and can use their SSAS pension to invest in the company.

SSAS rules

SSAS pensions are particularly common in small or family-run businesses and are a type of defined contribution pension scheme that’s open to all employees and their family members. This may include individuals who don’t work for the company directly, but are related to an employee. Only one SSAS pension is allowed per company and membership is capped at 11 individuals. SSAS pension scheme accounts are run by the Scheme Administrator and its trustees, who are often also members of the scheme.

HMRC SSAS rules allow members to invest in a range of assets including commercial property. The scheme can also offer commercial loans and could therefore provide a loan to the company in order to purchase an asset, such as a new building. Another difference of this defined contribution scheme is that it can borrow money, via a mortgage for example, as long as it’s for investment purposes.

The tax benefit of SSAS pensions

Any contributions members make to an SSAS pension are eligible for tax relief. Basic rate taxpayers get a 25% tax top up, meaning HMRC adds £25 for every £100 you pay into your pension.

If you pay a higher rate of tax, you’ll be able to reclaim additional tax relief through your tax return. Contributions paid into the scheme by the employer also qualify for tax relief which can help reduce its total tax liability.

Cashing in an SSAS pension

If you’re the member of an SSAS pension you can start drawing benefits from the age of 55 (57 from 2028). Like all personal or workplace pensions you can choose to take the first 25% of your pot as a tax-free lump sum or receive 25% of each withdrawal tax-free.

The amount of benefits you’re entitled to will depend on how much you and your employer have contributed to the scheme, how long each contribution has been invested and the performance of the investments.

After the tax-free amount, withdrawals will be subject to your normal rate of income tax. You can choose to take your pension as an income either by purchasing an annuity, or via income drawdown.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 12-08-2021

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