Ssas has always enjoyed maximum flexibility with regard to how benefits can be drawn.
Robert Graves, head of pensions technical services at Rowanmoor, says the new pension freedom to take as much or as little of the pension fund as required after age 55 has been embraced by Ssas.
Since April 2015, the tax rules have been simplified to give people unrestricted access to their pensions.
Drawdown of pension income is now taxed at marginal income tax rates rather than the current rate of 55 per cent for full withdrawals.
A tax-free lump sum is also available.
Mr Graves says there is little evidence that large sums have been withdrawn following the rule change, which may reflect the fact that many Ssas are used to invest in commercial property and loans over the medium to long term and therefore have not been susceptible to immediate cash withdrawals.
The biggest impact is with regard to the changes in death benefit tax, all the experts FTAdviser spoke to noted.
Under the new rules if you die in drawdown, pension death benefits can be paid to dependants (normally a partner or a child under the age of 23, or older, if the child is mentally or physically impaired) and a ‘nominee’ or a ‘successor’ may also be able to inherit a drawdown fund.
A nominee can be anyone who has been nominated by the member other than a dependant.
If the deceased has made no nomination and there are no dependants, the scheme administrator can nominate an individual to become entitled to the funds.
A successor can be anyone nominated by the previous beneficiary, or, if no nomination has been made by the beneficiary, by the scheme administrator.
If you die under age 75, the remaining fund can be paid out as a lump sum or as an income to beneficiaries free of any tax.
Issues could arise on the death of a member in being able to pay out cash sums to beneficiaries Robert GravesThe remaining fund can also be used by beneficiaries to buy an annuity where the annuity income will be free of any tax.
The tax exemptions only apply if benefits are either paid out as a lump sum or as income within two years, starting with the earlier of the member’s death or when the scheme administrator could reasonably have known of the death.
If not, the tax treatment reverts to the tax implications for post age 75 deaths.
Anyone who dies aged more than 75-years-old when in drawdown and income is taken, either through continued drawdown or buying an annuity, will have their income liable to income tax at the recipient’s marginal rate of tax.
The remaining fund can be paid out as a lump sum with a one-off tax charge of 45 per cent (reduced from 55 per cent) for the tax year 2015 to 2016.
With commercial property being a popular but illiquid investment, Mr Graves says issues could arise on the death of a member in being able to pay out cash sums to beneficiaries.
The new rules now give the opportunity for the deceased member’s share of the property to continue to be held within the Ssas in the form of beneficiaries flexi-access drawdown with the definition of beneficiary having been extended to essentially anyone nominated by the member.
Claire Trott, head of pensions technical at Talbot & Muir, agrees Ssas is well placed to deal with the pensions freedoms.
As individual schemes where the members are all generally trustees, Ms Trott says it will be up to them to decide which freedoms the scheme offers.
If their administrator isn’t able to facilitate it, which is unlikely, Ms Trott says it is simple to change administrator without the need to transfer assets or change the scheme significantly.
She agrees one of the biggest benefits that the pension reforms have brought is in relation to death benefits.
Often Ssas is set up for a family company and hold the company property.
The ability to nominate non-dependants to continue receive an income (even if nil is taken) rather than having to sell assets to out death benefits means they have a longer shelf life for the company, Ms Trott says.
She notes younger members can join and older members can draw income, making it flexible without impacting the stability of the core assets.
