Understanding Self Administered Pension Schemes



SSAS is one type of pension where there are a small number of members. This pension is sponsored by the employer and is based on a contribution scheme. The small group of members are typically senior executives and directors but even so, it is open to having other employees as members. The value of the pension comes from the total money that is paid into it on behalf of those members. It also depends on how long the contributions are invested.

Defined Contribution

This specialized pension from providers such as independent-trustee.com is designed to provide a specific number of staff within a company with retirement benefits. The most common staff that are included in this type of pension are usually senior members and important staff. It can include anyone but it's most common to have some of the key individuals in a company to be a part of this particular type of pension.

Even though it is usually provided to some key individuals it is actually open to any employee and even their family members. In fact, they don't even need to work for the employer. This particular type of pension plan, however, is limited to the number of members that can be in it.

Pension providers and insurance companies can offer SSASs. It is usually run by trustees. In some cases, those trustees may be members of the pension scheme. Any contributions can be made by the employer or by the members. There is tax relief available when making those contributions although they are subject to some conditions.

What Are The Benefits?

One of the biggest reasons that members value this type of pension is the fact that it gives greater flexibility with how or where the assets are invested. This means that while other types of pensions are not able to invest in certain things, this pension plan can. One example of this is the pension itself can purchase the business's trading premises and then they can turn around and lease it back to them. The pension plan can offer some conditions and terms as well as lend money to the company and buy shares in the company.

As long as it abides by the conditions and terms then the pension can borrow money and use it to invest with. One instance where it might do this is when it raises money to purchase the premises for the company and then the monthly payments on the mortgage will be included in the money paid into the pension by the company. The assets are held by the trustees.

This pension plan doesn't have an individual pot for each member but rather each is given a proportion of assets held by the scheme. You can start drawing benefits from the pension plan as early as age 55. The total value will be dependent on four different factors.

  1. The Total Amount That's Been Paid Into The Scheme On A Members Behalf
  2. The Total Length Of Time The Contributions Have Remained Invested
  3. The Amount Of Growth Experienced By The Investment
  4. The Number Of Charges

When a member receives payments from the pension it will be subject to income tax. Even so, it isn't liable for contributions to National Insurance. If you have made contributions to a pension scheme in the past you might still have benefits under that scheme. You should look into whether or not you can transfer the value of those old pensions to your new pension scheme.

Areas Of Concern

One of the big differences with this type of pension versus others is that it isn't given to an investment company or life insurance company but is rather invested by yourself. There are some regulations and restrictions on how you can use the money to invest. These are some of the main areas of concern.

If you want to invest in some property you have to make certain that the individual who is letting it or selling it is not connected in any way to SSAS. If they are it may be a breach of the regulations. It's also not allowed to buy a holiday home with funds from the pension. As well, buying property abroad is also against the rules. These are some things that you definitely want to avoid.

If you own a company or are the director of that company then the pension plan cannot buy shares in it. It's also not allowed to buy some things such as vintage cars, jewelry, or artwork. Any investment in those things would be a breach in the rules and regulations and isn't allowed.

There is a limit to the amount of stock that you can buy in privately-held companies that aren't traded on the stock exchange. The maximum limit for these types of investments would be 5% of the pensions total assets. It's also not allowed to purchase more than 10% of the total shares in a company.