August 10, 2023
Fifty years on from the introduction of the Small Self-Administered Scheme (SSAS) in 1973, we explore the features of this pension wrapper today in comparison to the most popular pension wrapper, the Self-Invested Personal Pension (SIPP), to establish who would benefit most from either option.
A SIPP is a personal pension which enables the holder to invest their assets in a wide range of investments, such as shares, property, commodities etc. This is the pension wrapper most commonly used by employers setting up pensions for their employees (unless the employee has opted out of making pension contributions via payroll deduction).
A SSAS on the other hand, is an individually registered pension scheme that was originally created to give company directors further control of their pension funds and investments. Whereas a SIPP is limited to the rules and investments of its provider, a SSAS is essentially dictated by its own members as they usually become trustees of the pension scheme. This enables SSAS scheme members to a wide range of novel options, such as:
Consequently, a SSAS benefits from a wide array of features which make it far more attractive than a SIPP for the right individual. This arrangement may be more suitable than a SIPP for company directors/part-owners who would like to:
A SIPP may be more suited to those who wish for greater jurisdiction over their pension assets. As a SSAS is a pooled pension scheme, any illiquid assets held collectively such as a commercial property unit may be difficult to sell when you wish to do so, unless another scheme member is willing and able to buy your share. A SIPP therefore often provides greater control and liquidity over an individual’s pension assets if they wish to sell some of their investments. A SIPP also has far less stringent eligibility criteria, as virtually any individual can open one as long as they’re under 75 and a UK resident or working overseas with relevant UK earnings. For most individuals who do not run their own company and may wish to take a more passive approach to their pension investments, SIPPs offer a simpler solution with less of the administrative burden than a SSAS requires.
Fifty years on from its inception, SSAS remain the most beneficial pension wrapper for company directors and business owners who wish to utilise the greater flexibility and tax advantages that the wrapper provides for their pension funds. For most others who wish to build their pension pots, SIPPs remain as attractive as ever, presenting a simpler solution with a wide array of investment options to suit both novice and experienced investors alike.
Get in touch if you’d like to find out more or talk to one of our Financial Planning Experts.