Alternatives to Ssas schemes

John Keenan, senior manager of Xafinity, says some small employers may be very happy to simply pay pension contributions into a regular small defined contribution arrangement, such as the National Employment Savings Trust (Nest).

But he says if they want to self invest into their own business, a Sipp is the most likely alternative to a Ssas.

The products are broadly similar in many ways – contribution limits, lifetime allowances, retirement options and investment options (including commercial property and land) – although only the Ssas can agree a loanback to the sponsoring employer.

A Sipp is open to the self employed, whereas a Ssas is an employer sponsored scheme.

As a Sipp is an individual scheme, Claire Trott, head of pensions technical at Talbot & Muir, points out they don’t have the same benefits as a group Ssas scheme with regards to pooling assets or loan backs to the employer.

When a number of individuals want to purchase an asset together then the costs of multiple Sipps can be significantly more than a single Ssas for the same members, she notes.

There are occasions where, depending on the assets, a single or sometimes a small group of Sipps may be more appropriate Martin Tilley

Ultimately a Ssas is only necessary where the use of its investment flexibility makes the premium of its costs more valuable than investing into more conventional insured or platform based alternatives, says Martin Tilley, director of technical services at Dentons Pension Management.

Even when this is the case, Mr Tilley says there are occasions where, depending on the assets, a single or sometimes a small group of Sipps may be more appropriate.

He says it might also be that where there is no common employer, a Ssas might not work and a group Sipp may be a more appropriate vehicle.

A group Sipp is designed to provide a pooled investment fund for a group of individuals in an effective way. A group Sipp could offer the individuals far greater freedom over where they invest their pension contributions than a traditional personal pension could.

Typically, investors in a group Sipp will be business professionals wanting to buy property, but it can be used for any situation where pension funds are pooled.

Another alternative could be the use of a Family Pension Trust. Not many providers actually offer these, as they are quite niche, but essentially an FPT is a combination of a self-invested personal pension and a Ssas scheme.

According to Robert Graves, head of pensions technical services for Rowanmoor, an FPT is a private pension scheme, independently established for the benefit of its members, under trust and registered with HM Revenue & Customs.

These may be a group of financially like-minded individuals or family members. Each member has a separate arrangement within the scheme and, according to Rowanmoor, has full control of his or her own pension investments, subject to the trust deed and rules of the scheme.

The scheme structure allows people to have a wider investment horizon, including commercial property purchase and discretionary fund management, and greater borrowing potential.

Income from the assets can fund benefit payments, without forcing the sale of scheme assets, and there are options to provide benefits for dependants and nominated beneficiaries, helping with tax planning. Death benefits can usually be paid free from inheritance tax, before age 75.