Seriously SSAS-sy...

The recent growth of the SIPP market has perhaps made SSAS appear less fashionable. But as Simon Causton explains, it still has a major role to play in self-investment

A-Day saw SSAS and SIPP come together in terms of ­contributions that can be paid, ­benefits that can be drawn, and their ­borrowing ­facilities. There is little ­difference in the investments that can be held in each pension arrangement. But there are areas in which SSAS has certain ­advantages. Here are some of those benefits:

Loan facility

SSAS has retained the ability to lend funds to businesses ­controlled by scheme members. In a ­market where credit remains tight, there has been an increase in the number of ­enquiries over loan requests.

Investments in unquoted shares

A SSAS has the ability to hold unquoted shares, typically those in the sponsoring employer of the scheme. Under HMRC rules, a SSAS can invest up to 5% of the net value of the fund in the shares of any one connected party, up to a maximum of four connected ­companies – or 20% in total.

Sure, SIPPs can invest in such shares. But as the 5%-20% ­concession is not available, many providers prefer not to allow ­connected party shares to be held due to the potential tax issues that may arise and the need for the activities of the company, in which shares are held to be monitored.

Scheme structure

SSAS assets can either be pooled between the members – such as, each member will have a percentage share of the whole fund – or be ­notionally earmarked.
With a typical SSAS sponsored by a family-run business, where the members are mum, dad and the kids, notional earmarking can have a distinct advantage. Where older members of the SSAS are drawing their pension from the fund, it may be that they wish to adopt a more conservative approach to investment, with the younger generation adopting a more bullish strategy.

Unlike with a SIPP, if scheme members decide at any time to re-allocate individual investments between them for equal value, then under a SSAS this can simply be done by mutual agreement via a written resolution. There is no need to re-register or transfer ­assets to reflect the new split.

Individual trusts

The fact that each SSAS is ­written under its own individual trust also has certain benefits. ­Although most providers who act as scheme administrator and a ­professional trustee are likely to restrict ­investments to non-taxable assets, the restriction of liability within any one scheme (as ­opposed to where a master trust is used ­covering all arrangements of that provider) does perhaps allow a more flexible investment strategy to be adopted than otherwise.

The trust structure of SSASs is also ideally suited to drawing benefits via the scheme pension. As to whether the scheme ­pension has a future, given the terms of the ­Government’s review of the ­requirement to annuitise at age 75, only time will tell.

Service and the provider’s role is also a key issue. Under SIPPs, the provider will, with a few exceptions, act as the scheme administrator, and adopt responsibility for any tax charges that might be levied against the pension fund. Along with the member ­trustees, most SSAS ­providers will act as scheme administrator. The ­trustees will then act solely as scheme ­administrator and be responsible for tax charges. It is a decision for the trustees as to whether they are happy for their provider to act solely as a ­practitioner.

So despite the introduction of the new rules at A-Day, it is clear that there are still ­differences in benefits and ­usage, highlighting the need for ­advisers to consider SSAS when recommending self-invested schemes.