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PENSIONS - SSAPs (Small Self Administered Pensions)

Posted on: Friday, December 05, 2014

SSAPs (Small Self Administered Pensions)

Small Self Administered Pensions are occupational pension schemes with 12 or fewer members.

They are entitled to the same tax relief as ordinary occupation schemes; however, the scope of assets that can be invested in is more restricted.

A self administered pension fund is considered small where if there are more than 12 members:
(a) 65% or more of the value of the investments in the scheme are for
(b) 20% directors or their spouses, civil partners and/or dependants.

What is different about these schemes and occupational pension schemes?

These schemes enable the beneficiaries to influence the type of investments subject to there being no investment in prohibited assets.

Who uses SSAPs?

They are mainly used by Propriety Directors of private companies (i.e. they have a share holding of more than 5%).

They are considered to be a tax efficient method of cash extraction from companies.


John Smith incorporated his business John Smith Ltd. a number of years ago.

He wants to make provision for his old age but he doesn’t trust the pension companies and wants to play an active role in managing his pension.

He decides to set up an SSAP because he’s been told that with a pensioneer trustee, he can have a say in the investments the SSAP would make

John Smith Ltd. can fund his pension through employer contributions without having to worry about the earnings CAP which would normally apply to employee contributions. 

Also, the company will get a corporation tax deduction for the contributions made on John’s behalf.

Are there any disadvantages to setting up SSAPs?

1. There is a requirement to submit annual accounts and three year actuarial reports.
2. Because the scheme requires management and direction this could take up a considerable amount of time which may be very costly.
3. Because there is no requirement to have a balanced portfolio this could lead to a poor return on the investments.

Are there any restrictions to be aware of?

1. It is prohibited to make loans to members of the scheme.
2. Investment Property can only be acquired if certain conditions are fulfilled.
3. Self investment is specifically disallowed.

Final Points to keep in mind

It is always important to remember that the maximum level of pension that can be provided under an occupational pension scheme is dependant on
(a) earnings and
(b) the length of service.



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