Typically Ssas, which are defined as a pooled occupational money purchase pension schemes, are set up under trust by limited companies for their owners and directors, says Andrew Roberts, partner at Barnett Waddingham.
“They are intended primarily for the benefit of company directors and other highly paid employees, but family members and other individuals may also join the scheme; typically a Ssas can have up to 12 members in total,” adds Carl Lamb, managing director of IFA firm Almary Green.
As Ssas are an occupational pension scheme they must be established by an employer, known as the sponsoring employer. All members of the scheme must be trustees, or directors of a trustee company, and all investment decisions must be made by the member trustees unanimously.
Mr Roberts adds that Ssas have similar investment flexibility to Sipps, and unlike larger occupational pensions are typically exempt from costly administrative burdens imposed on most company schemes.
“A Ssas has similar investment options to Sipps and can allow pension savings to be loaned back to the sponsoring company. It is usual for a Ssas to provide money purchase benefits and so contribution, retirement and death benefit rules mirror those of a Sipp.”
John Glover, business development manager at City Trustees, says there is little to choose between Sipps and Ssas, saying they are regulated in the “same way” by HMRC and thus basic rules surrounding, lending, borrowing and investment are exactly the same for both.
Mr Roberts estimates that the Ssas market numbers 35,000 schemes compared with 970,000 Sipps. Mr Glover says such statistical disparities display that Ssas are often overlooked, stating that they could be appropriate “when the directors of a business are requiring more control over the investment decisions”.
Despite the similarities in terms of investment flexibility and tax regulation between Ssas and Sipps, there are a number other differences between the two:
• Ssas have the ability to make a secured loan to the sponsoring employer, says Lisa Webster, senior technical consultant for Hornbuckle Mitchell, which makes them an attractive option when banks are not lending to SMEs. They can also invest up to 5 per cent of the fund value in the shares of the sponsoring company;
• Ssas are not regulated by the FSA but may have to be registered with The Pensions Regulator;
• Ssas trustees are not required to provide statutory money purchase illustrations (SMPIs) provided all members are trustees; and
• Ssas can have non-allocated funds (not attributable to one particular member) which can help with phasing of contributions. Refunds of these funds to the employer can be made less 35 per cent tax.
Mr Roberts adds that because each Ssas is a scheme under its own right they are typically more flexible overall than a Sipp.
“Members have more control over its running as there is no pension provider per se, even though there may be a pension firm offering professional trusteeship and/or administration.”
