Ssas vs Sipp: what you need to know

SSASs have a rich history and have played a significant role in empowering individuals to take control of their retirement savings and investment decisions.

Indeed, had it not been for the Ssas, Nigel Lawson might not have introduced the Sipp (self-invested personal pension) in 1989, which effectively extended the freedoms to control and invest for individuals who were ineligible for a SSAS. 

History of the SSAS

The first SSASs were written around 1976 and following three years of experience with applications, the Joint Office of the Inland Revenue Superannuation Funds Office and the Occupational Pensions Board felt it necessary to release memorandum number 58, the first real source of guidance for SSASs.

This document clarified the prohibition of loans to members of the scheme, the necessity for “commercial arm’s length arrangements” between the scheme and any connected employer, and permitted the deferral of the purchase of an annuity for a period of five years following a member’s retirement.

It also reinforced the requirement of the appointment of a 'pensioneer trustee' whose primary role was to prevent the inappropriate wind up of the scheme. 

The tightening of HMRC’s check and register process has now shut the door on scammers' route to this market.

Other restrictions on scheme investment at that time were more relaxed than under the current regime.

It was not until the retirement benefits schemes (restriction on discretion to approve) (SSAS) regulations 1991 that the likes of residential property and personal chattels (such as works of art and classic cars etc) were prevented, with grandfathering rules for schemes that already held these assets.

This statutory instrument also tightened the rules around lending to connected employers, and while these tighter controls functioned as guidelines, the schemes still operated at that time under the discretionary powers of the Inland Revenue, which allowed a common sense approach to be negotiated on investments that might have blurred the lines of acceptability.

I can recall face-to-face meetings at Thames Ditton with the revenue’s representatives arguing the case for continued approval of a scheme that had sailed close to the wind.

Sadly, all this was to change in 2006 with the implementation of 'A-Day', where HMRC rescinded their discretion to approve pension schemes in favour of the registered dcheme approach, which remains today.

The market for SSASs has increased following the regulatory backlash on Sipps.

The much-heralded reintroduction of permitted residential property was quashed, as was the requirement for a pensioneer trustee – a move which without replacement has in my view led to some of the problems experienced with SSASs over the past 10 years.